MODERATING EFFECT OF CORPORATE GOVERNANCE ON THE RELATIONSHIP BETWEEN FIRM CHARACTERISTICS AND FINANCIAL PERFORMANCE OF LISTED COMMERCIAL SERVICE COMPANIES IN KENYA
Abstract
Firm characteristics such as size, leverage, liquidity, and corporate governance play a critical role in determining how businesses operate and compete within their environments. These attributes influence market share and ultimately, the financial income generated. In Kenya, the number of companies listed on the Nairobi Securities Exchange has continued to face severe financial challenges, leading to suspensions and delisting over the past decade. This study sought to establish the effect of firm characteristics on the financial performance of listed commercial service companies in Kenya. The objectives were to examine the effect of firm size on the financial performance of listed commercial service companies, to establish the effect of leverage on the financial performance of listed commercial service companies, to determine the effect of liquidity on the financial performance of commercial service providers in Kenya, and to establish the effect of asset tangibility on the financial performance of listed commercial service providers in Kenya. The study was guided by resource-based theory, agency cost theory and stakeholder-based theory. The study was anchored on positivism. A correlation research design was adopted. The target population was 11 commercial services companies listed on the Nairobi Stock Exchange in Kenya. All the listed commercial services were used in the study. Secondary data was collected using a secondary data collection sheet from audited financial statements ranging from 2014 to 2023. Panel Data was analyzed using descriptive and inferential statistics. Descriptive statistics comprised of mean, variance, frequencies and standard deviation. Inferential statistics included multiple regression, correlational analysis and the Hausman test for fixed and random effects. Normality was tested using the Shapiro-Wilk and Levin-Lin-Chu test for stationarity. Heteroscedasticity was tested through the Breusch-Pagan test. Multi-collinearity was tested using variance inflation factors and autocorrelation through Durbin-Watson statistics. This study laid the basis for further research and was important to stakeholders and managers of firms by providing more insights into the management of commercial services companies.
JEL: G32 – Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure, G30 – General Financial Markets and Corporate Finance, L25 – Firm Performance: Size, Diversification, and Scope, M21 – Business Economics
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DOI: http://dx.doi.org/10.46827/ejefr.v10i4.2241
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