The Relationship between Ownership Structure and Environmental Sustainability Disclosure among the Listed NSE Firms in Kenya

Abstract

The study examines the relationship between ownership structure (ownership concentration and institutional ownership)and ecological sustainability disclosures on firms listed at the Nairobi Securities Exchange. The study period was (5) years (from 2013 to 2017). It employed a correlational survey research design covering the period of five (5) years (2013 -2017). The target population was sixty-five (65) firms listed at the NSE, with a sample size of 56 firms. Data was utilised from firms’ annual reports,stand-alone reports, and website. Pearson’s correlation, Ordinary Least Square regression model and Environmental Disclosure Index were used in analysis. The results showed that the change in ownership concentration (F= 1.77, ρ=.13>.05) and institutional ownership (F= 1.57, ρ=.18>.05) between 2013 to 2017 was not statistically significant. The correlation findings indicated institutional ownershipbeing positively related to environmental sustainability disclosure r = .218, p<.01, while ownership concentration was not correlated with environmental sustainability disclosure, r = 0.074. Using the fixed effect model,ownership concentration had a negative and insignificant effect on environmental sustainability disclosure (β= -.02, ρ>.05), whileinstitutional ownership showed a positive and significant effect on environmental disclosure sustainability (β= .05, ρ<.05).For the random effect model, ownership concentration showed a negative and significant effect on environmental sustainability disclosure (β= -.03, ρ<.05), with institutional ownership indicating a positive and significant influence on environmental sustainability disclosure ((β= .04, ρ<.05). The study thus observed a positive association between ownership structure and environmental disclosures, implyingthat the more concentrated ownership by one institution owning more than 50 percent of a company’s shares, the more favourable it is in relation to enhancing environmental disclosure. This supports the legitimacy theory.The study indicated that institutional ownership is most preferred when it comes to enhancing environmental disclosure. More so, on matters regarding environmental disclosure, higher ownership by the regulatory authorities is paramount since as it will influence compliance and disclosure. Future studies needs to focus on government share ownership in the firms and the resulting effects on corporate environmental disclosures, as well as individual shareholders shareholding capacity versus shareholding by firms.