Effects of Firms Characteristics, Asset Growth and Financial Performance of Non-financial Firms Listed at Nairobi Securities Exchange

Abstract

Attributes and traits of companies had garnered significant importance within the corporate finance domain, serving as pivotal intermediaries in the financial landscape. This research aimed to investigate the impact of firm characteristics on fiscal performance of non-financial firms listed on the Nairobi Securities Exchange. The fundamental question addressed was how variations in capital structure, firm size, tangibility, and asset growth influenced financial performance outcomes among these firms. This research employed a descriptive research design to explore these relationships comprehensively. Spanning from 2019 to 2023, the research covered a five-year period, allowing for an in-depth examination of trends, patterns, and changes within the sector. This duration encompassed both short-term fluctuations and longer-term developments, providing a robust basis for analysis. Using SPSS software, the study utilized multiple regression analysis to elucidate the correlations among the variables under investigation. R Squared value indicated that 85.6% of the variation in financial outcomes is attributed to variations in capital structure, firm size, tangibility, and asset growth. This indicated a strong collective influence of these variables on financial performance outcomes, while 14.4% of the variability remained unexplained by the factors included in the study. ANOVA findings emphasized the statistical importance of the model, with a p-value of 0.000 demonstrating compelling evidence against the null hypothesis. This indicated a strong connection between the independent variables and financial outcomes among non-financial companies listed. Specific findings indicated that firm size, capital structure, and tangibility significantly impacted financial performance. A unitary increase in firm size showed a substantially noteworthy positive effect of 0.3% on financial performance (β = 0.003, p=0.036 < 0.05). Similarly, capital structure demonstrated a substantial positive effect, with a unitary increase associated with a 15.7% improvement in financial performance (β = 0.157, p=0.001 < 0.05). Tangibility also exhibited a significant positive effect, indicating that firms with higher tangible assets performed better financially (β = 0.249, p=0.000 < 0.05). Conversely, asset growth showed a positive but statistically insignificant effect (β = 0.259, p=0.584 > 0.05), aligning with previous studies that have reported mixed effects. Based on these findings, several recommendations were made for policy and practice to enhance fiscal performance among non-financial entities on the NSE. Firms were advised to focus on effectively managing their size through strategies that promote controlled growth and operational efficiency. Responsible use of debt can foster growth and innovation without straining financial capacities, supported by policies encouraging sustainable capital structures. Optimizing tangible assets through strategic investments aimed at enhancing productivity and resilience was also recommended. Additionally, future research should consider these factors when designing methodologies and interpreting findings to strengthen the robustness and applicability of studies exploring similar research questions across diverse economic landscapes.