Firm size and firm financial performance: panel evidence from nonfinancial firms in nairobi securities exchange, Kenya

Abstract

: Non-financial firms listed in Nairobi Securities Exchange (NSE) contribute 31.4% of GDP which is far below the global average of 50% for the non-financial listed firms in the developed world. Moreover, some of them have suffered suspension and delisting according to statistics from NSE. Despite the underlying discrepancies, most studies have focused on either individual accounting and the results of these prior studies have been mixed; while some researchers reported positive relationships, others reported negative however, an analysis of firm size, and financial performance of non-financial firms in (NSE) using Business Performance Composite Index proxy of performance and panel methodology was sought. Therefore, the purpose of this study was to analyze firm size and financial performance of non-financial firms listed in NSE, Kenya. The study was anchored on Economic, trade-off and Signaling theories. Population consisted of all the forty nonfinancial firms listed at NSE where purposive sampling was used. The study was based on correlational research design. Secondary data from 2010 - 2016 was obtained from financial reports using data collection sheet. The data was subjected to unit root test to check on stationarity. The data was analyzed using panel correlation and fixed effects multiple regression analysis by pooling the data of 28 firms over 7 years period to get 196 data points. The findings revealed that firm size accounted for insignificant variance of 2.65% in BPCI and with positive coefficient of .057844. Findings form this study may be helpful to shareholders in making prudent investment decisions; Management in formulation of policies; and academia as a basis of further research in finance and capital structure decisions