Influence of institutional share ratio on financial performance of sugar factories in western Kenya

Existing literature points a conflicting relationship between Institutional Share Ratio and financial performance of sugar factories in western Kenya. More alarming is the extend of weak corporate governance that continues to haunt sugar factories with many experiencing financial scandals that has culminated to their collapse. Though existing studies shallowly focus on the term corporate governance, this study critically investigated institutional shareholding ratio and financial performance of sugar factories in Western Kenya. The study is based on Stewardship theory and adopted descriptive survey research design, targeting 130 officers from sugar factories in Western Kenya. Sample size was determined using Taro Yamane’s proportional sampling technique formula. Primary data was collected by means of self-administered questionnaires, then coded, cleaned and analyzed using descriptive and inferential statistics using (SPSS) software. Results were presented using tables for easy readability. Data was organized into graphs and tables for quick and easier reference. Also, inferential statistics, regression and correlation analyses in order to assess the strength of the relationship between the dependent and independent variables. The study findings showed a positive high correlation between institutional share ratio and financial performance (R= 0.706 with profitability). It was evident from results that institutional share ratio has positively contributed to financial performance of sugar factories in Western Kenya and there was variation on financial performance due to changes in institutional share ratio. The study recommends that commercial banks should adhere to prudential regulations to ensure financial stability and increased financial performance coupled with increased volume of business. It also recommends sugar factories management should adhere to and implement good corporate governance. Furthermore, Kenya Sugar Board which is the regulator should tighten regulations and monitoring to ensure compliance with statutory regulations so as to protect institutional investors and encourage investments. The study concluded that institutional share ratio influenced financial performance of Sugar factories in Western Kenya.