Panel Data modelling:applicationto Financial Performance of Non-financial Firms Listed at Nairobi Securities Exchange
Abstract
Background: Financial performance has always been estimated using cross-sectional
data. However, because typical firm heterogeneity is not effectively controlled, biased
results have been reported. Both specific and general group behaviors can be designed
using panel data. They provide useful information, are more efficient, and have larger
fluctuations than cross-sectional data. Data that is cross-sectional or time series in nature,
as opposed to data that is a panel in form, is incapable of detecting and quantifying the
statistical effect. With the most appropriate panel data model to predict and monitor the
factors associated with the financial performance of non-financial firms as listed on the
Nairobi Securities Exchange, researchers will get to find the relevant elements using panel
data rather than cross-sectional data, especially in finance. It will also make it easier for
investors to spot trends among the NSE’s listed companies. This study thus sought to
bring into light the most appropriate panel model in analysing the different factors that
affect the financial performance of non-financial firms listed on the Nairobi Securities
Exchange.
Objective This study’s primary objective was to determine the most appropriate panel
data model to predict and monitor the factors associated with the financial performance
of non-financial firms as listed on the Nairobi Securities Exchange. The findings will
thus add to the existing body of knowledge and enlighten potential investors on how to
evaluate performance over time. Other stakeholders who will find the findings useful
include the Kenyan government and Capital Markets Authority and will use the results
in formulating regulations and policies for publicly listed companies.
Methods: This study adopted a panel data approach in the attempt to investigate the
factors influencing the financial performance of non-financial institutions listed at the
Nairobi Securities Exchange, Kenya. The study used the data obtained from the Nairobi
securities exchange on the financial performance of non-listed firms. Descriptive statistics
was also used to understand the nature of the data in relation to the research interest.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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