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Ownership structure and financial distress: is the tale from Sub-Saharan Africa different?

Author

Listed:
  • Mohammed Abdulkadir
  • Samuel Nduati Kariuki
  • Peter Wang’ombe Kariuki

Abstract

Purpose - The paper investigates the effect of ownership structure on the financial distress of firms listed in sub-Saharan Africa. Design/methodology/approach - Using secondary data from 106 non-financial firms listed in 9 selected SSA countries from 2016 to 2021, the research using pairedt-tests and conditional logistic regression model analysed a sample of 174 distressed observations matched with 174 non-distressed observations. Findings - T-tests determined significant differences between distressed and non-distressed groups concerning institutional, foreign, and local ownership. Conditional logistic results established that institutional, foreign, and state ownership significantly reduce distress. However, managerial ownership does not influence financial distress while a significant positive relationship is observed between local ownership and financial distress. Originality/value - This is the first study to investigate the influence of ownership structure, including local ownership, on financial distress in SSA, employing a unique methodology of matched design and conditional logistic regression analysis. Furthermore, the paper presents cross-country evidence from emerging frontier markets, highlighting the importance of governance frameworks in firms’ stability.

Suggested Citation

  • Mohammed Abdulkadir & Samuel Nduati Kariuki & Peter Wang’ombe Kariuki, 2024. "Ownership structure and financial distress: is the tale from Sub-Saharan Africa different?," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 16(1), pages 127-147, July.
    • Handle: RePEc:eme:ajemsp:ajems-03-2024-0153
    DOI: 10.1108/AJEMS-03-2024-0153
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