Shareholder loyalty and firm value creating outcomes in Kenya

  • Amos Muhinga Kimunya United States International University - Africa
  • Amos Njuguna United States International University - Africa
  • Francis Wambalamba United States International University - Africa
Keywords: Shareholder Loyalty, Firm Value Creation, Institutional Investor


The study aimed at examining the effect of shareholder loyalty on firm value-creating outcomes in Kenya.  The study used a sample of 117 institutional shareholders in listed firms in Kenya. Data was collected through questionnaires and analyzed using descriptive statistics such as mean, mode, and median and inferential statistics including factor analysis, regression, and analysis of variance (ANOVA). The study concluded that shareholder loyalty has no significant effect on firm value-creating outcomes. The study contributes to the literature on shareholder engagement, particulary on shareholder loyalty from a Kenyan angle. Shareholders are advised to consider their initial cost of investment, costs, and penalties on exit and impact on their business interests with the firm as they decide on their voice or exit actions.


Adegbite, E., Amaeshi, K., & Amao, O. (2012). The politics of shareholder activism in Nigeria. Journal of Business Ethics, 105(3), 389–402.

Admati, A. R., & Pfleiderer, P. (2009). The “Wall Street Walk” and shareholder activism: Exit as a form of voice. The Review of Financial Studies, 22(7), 2645–2685.

Amao, O., & Amaeshi, K. (2008). Galvanising shareholder activism: A prerequisite for effective corporate governance and accountability in Nigeria. Journal of Business Ethics, 82(1), 119–130.

Becht, M., Franks, J., Grant, J., & Wagner, H. F. (2017). Returns to hedge fund activism: An international study. Review of Financial Studies, 30(9), 2933–2971.

Black, B. S., & Coffee Jr., J. C. (1994). Hail Britannia?: Institutional investor behavior under limited regulation. Michigan Law Review, 92(7), 1997–2087.

Chung, H., & Talaulicar, T. (2010). Forms and effects of shareholder activism. Corporate Governance: An International Review, 18(4), 253–257.

Clark, G. L., & Hebb, T. (2004). Pension fund corporate engagement: The fifth stage of capitalism. Industrial Relations, 59(1), 142–171.

Crespi, R., & Renneboog, L. (2010). Is (Institutional) shareholder activism new? Evidence from UK shareholder coalitions in the pre-Cadbury era. Corporate Governance: An International Review, 18(4), 274–295.

Denes, M. R., Karpoff, J. M., & McWilliams, V. B. (2017). Thirty years of shareholder activism: A survey of empirical research. Journal of Corporate Finance.

Donald, D. C. (2005). Shareholder voice and its opponents. The Journal of Corporate Law Studies, 5(2), 1–60.

Edmans, A., & Manso, G. (2011). Governance through trading and intervention: A theory of multiple blockholders. The Review of Financial Studies, 24(7), 2395–2428.

Gillan, S. L., & Starks, L. T. (2007). The evolution of shareholder activism in the United States. Journal of Applied Corporate Finance, 19(1), 55–73.

Goodman, J., Louche, C., van Cranenburgh, K. C., & Arenas, D. (2014). Social shareholder engagement: The dynamics of voice and exit. Journal of Business Ethics, 125(2), 193–210.

Goranova, M., & Ryan, L. V. (2014). Shareholder activism: A multidisciplinary review. Journal of Management (Vol. 40).

Hirschman, A. O. (1970). Exit, voice, and loyalty: Responses to decline in firms, organizations, and states. Cambridge, MA.: Harvard University Press.

Ingley, C., Mueller, J., & Cocks, G. (2011). The financial crisis, investor activists and corporate strategy: Will this mean shareholders in the boardroom? Journal of Management and Governance, 15(4), 557–587.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.

Kim, J., & Schloetzer, J. D. (2013). Global trends in board-shareholder engagement. The Conference Board Director Notes, DN-V5N20(October), 1–11.

Marler, J. H., & Faugère, C. (2010). Shareholder activism and middle management equity incentives. Corporate Governance: An International Review, 18(4), 313–328.

McCahery, J. A., Sautner, Z., & Starks, L. T. (2016). Behind the scenes: The corporate governance preferences of institutional investors. Journal of Finance, 71(6), 2905–2932.

McNulty, T., & Nordberg, D. (2016). Ownership, activism and engagement: Institutional investors as active owners. Corporate Governance: An International Review, 24(3), 346–358.

Pergola, T. M., & Verreault, D. A. (2011). Motivations and potential monitoring effects of large shareholders. CORPORATE GOVERNANCE: The International Journal of Business in Society, 9(5), 551–563.

Pfarrer, M. D. (2010). What is the purpose of the firm?: Shareholder and stakeholder theories. In J. O’Toole & D. Mayer (Eds.), Good business: Exercising effective and ethical leadership (pp. 86–93). Routledge.

Singh, A. S., & Masuku, M. B. (2014). Sampling techniques & determination of sample size in applied statistics research: An overview. International Journal of Economics, Commerce and Management, II(11), 1–22.

Viviers, S., & Smit, E. vdM. (2015). Institutional proxy voting in South Africa: Process, outcomes and impact. South African Journal of Business Management, 46(4), 23–34.

Yamahaki, C., & Frynas, J. G. (2016). Institutional determinants of private shareholder engagement in Brazil and South Africa: The role of regulation. Corporate Governance: An International Review, 24(5), 509–527.

How to Cite
Kimunya, A., Njuguna, A., & Wambalamba, F. (2019). Shareholder loyalty and firm value creating outcomes in Kenya. International Journal of Research in Business and Social Science (2147- 4478), 8(5), 212-219.