Ownership concentration, foreign ownership and corporate performance among the listed companies in East African community: the role of quality institutions

This study examines the role of institutions to stimulate the relationship between foreign ownership and corporate performance for the panel data of 58 non-financial listed firms in EAC over 2007-2015. The panel unit root tests by Im-Pesaran-Shin and Fisher-ADF confirm that data are stationary and are also cointegrated according to Pedroni tests. The regression output using GMM estimator reveals that ownership concentration is negative and statistically significant determinant of corporate performance. Moreover, the significant positive relationship between the interaction term (foreign ownership and institution) and corporate performance indicates that quality institutions stimulate foreign ownership towards superior corporate performance and the protection of minority shareholders. Acknowledging the importance of minority shareholders for capital market development and economic output, this study recommends to the authorities to enforce ownership structure diversity and enforce quality institutions for accelerating the catching up of the potential foreign shareholders towards economic growth.