Influence of firm size on financial performance of firms listed at Nairobi securities exchange, Kenya

Abstract

The purpose of the study was to establish the influence of firm size on financial performance of listed firms at NSE. The study used a correlation research design. For this study, the target population is represented by a number of companies from different sectors listed on the NSE in Kenya from 2016-2020. The study used data from firms that were consistently listed in NSE from 2016 – 2020 the ones that were delisted and or suspended and that were listed after 2016 were not included, creating a sample size of 55 firms yielding a panel of 275 data points. The study adopted a purposive sampling approach since it satisfied the criteria of the study. The study used secondary data obtained from annual audited financial statements of listed firms using data collection sheets. The study used descriptive statistics; mean maximum, minimum, and standard deviations; inferential statistics; Pearson correlation analysis, and multivariate regression analysis to analyze the data within the panel data framework. Trend results showed firm size of NSE firms was in an increasing trend across 2016 – 2020. According to the results, using ROA, company size had significant and positive effect. However, using ROE, firm size had insignificant positive impact. In conclusion findings demonstrate company size had significant influence using ROA, however results showed also that firm size had no significant influence on financial results using ROE. The study recommended that management of NSE-listed companies take into account their firms' sizes. Due to their market power, a company's size is important because larger firms can perform better than smaller ones because of economies of scale, earning higher returns. Additionally, larger total assets may result in higher returns on assets; consequently, businesses should always aim to increase total assets