Asset Structure and Financial Performance: A Case of Firms Quoted Under Commercial and Services Sector at the Nairobi Securities Exchange, Kenya

Abstract

This study sought to determine the relationship between the asset structure and the financial performance of the firms quoted under the commercial and service sector at the NSE, Kenya. The target population by the study was the secondary data from the annual reports of the firms. The asset structure is analysed in term of: Property, Plants and Equipment; current assets; intangible assets; and long term investments and funds, which formed the independent variables. The dependent variable of interest was the financial performance of the firms, and was measured in terms of: earning per share; return on assets; return on equity, profit margin (return on sales); and current ratio, by aid of a composite index. A census was done on the entire firms listed under this sector by the year 2014, for a five year period, 2010 to 2014. A document review guide was used to collect the secondary data from the financial statements of the firms under study. A multiple regression analysis (standard) was conducted with the aid of statistical programs SPSS version 21. The results of the study indicate that asset structure had a significant statistical effect on the financial performance. In particular, the study found that: Property, Plants and Equipment, and long-term investments and funds have a statistically significant effect on financial performance, while current assets and intangible assets do not have statistical significance on financial performance. This study concluded that the firms should increase the allocation of resources towards long term investments and funds, and utilize available resources in terms of the Property, Plant and Equipment effectively.

Keywords: Asset structure, financial performance, listed firms, commercial and services firms.

List of acronyms

ROA       - Return on assets

ROE        - Return on equity

NSE        - Nairobi Securities Exchange

EPS         - Earnings per Share

PPE         - Property, Plant and Equipment