Determinants of the financial performance of firms listed at the Nairobi Securities Exchange

Aloys Ayako, Thomas Githui and George Kungu

Perspectives of Innovation in Economics and Business (PIEB), 2015, vol. 15, issue 2, 84-94

Abstract: This study analyzed the factors affecting the performance of 41 non-financial companies listed on the Nairobi Securities Exchange (NSE) using panel data over the period 2003 to 2013. A Hausman test results suggested the application of a random effects model for ROA and a fixed effects model for ROE. The empirical results of the estimation of both ROA and ROE show that corporate governance was statistically significant in determining the performance of firms and it had the expected sign (Positive). The leverage of the firm also had the expected negative sign and was statistically significant in explaining the performance of companies. Firm size and liquidity were however found to be statistically insignificant in determining the performance of these firms. Consistent with previous studies, the study concluded that board size, board independence and liquidity are key determinants of a firm’s financial performance. Consequently, the study recommends that a firm should ensure optimal board size, board independence (i.e increase the number of non-executive directors and sound liquidity management.The study recommends comparative studies to be undertaken on the factors influencing the financial performance of the financial and non-financial companies listed at the Nairobi securities exchange as well as those not listed. In addition, it recommends that further studies could be extended to analyze the factors affecting the performance of companies at cross-country level such as within the East African Community.

Keywords: Financial performance; liquidity; leverage; Nairobi Security Exchange; return on assets; return on equity (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://academicpublishingplatforms.com/downloads/ ... xchange_pp.84-94.pdf (application/pdf)
https://academicpublishingplatforms.com/article.ph ... mber=22&article=2154

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pdc:jrpieb:v:15:y:2015:i:2:p:84-94

Access Statistics for this article

Perspectives of Innovation in Economics and Business (PIEB) is currently edited by Jan Beseda

More articles in Perspectives of Innovation in Economics and Business (PIEB) from Prague Development Center Contact information at EDIRC.
Bibliographic data for series maintained by Jaroslav Holecek ( this e-mail address is bad, please contact ).