Corporate Governance, Financial Characteristics, Macroeconomic Factors and Performance of Manufacturing Firms Listed at the Nairobi Securities Exchange

Abstract

Performance of manufacturing firms listed at the Nairobi securities exchange has been varied since the introduction of the corporate governance policies and practices in the year 2002. This has been blamed to a number of factors including financial characteristics and macroeconomic factors. The specific objectives were to establish the effect of corporate governance on performance of manufacturing firms listed at the Nairobi securities exchange; to determine the intervening effect of financial characteristics on corporate governance and performance of manufacturing firms; to establish the moderating effect of corporate governance and performance of manufacturing firm; and to determine joint effect of corporate governance, financial characteristics, macroeconomic factors and performance of listed manufacturing firms at the Nairobi securities exchange. This study was anchored on, agency theory, stewardship theory, stakeholders’ theory and resource dependence theory. The study used census approach and a target population of 10 manufacturing firms listed at the Nairobi securities exchange between 2002 and 2016 were incorporated. This study employed longitudinal descriptive research design to determine relationships amongst independent, intervening, moderating and dependent variables. A panel data regression analysis was conducted using random effects model. The study findings revealed that corporate governance had insignificant effect on performance of listed manufacturing firms in Kenya; investments, leverage and liquidity  significantly intervene in the relationship between corporate governance and performance of listed manufacturing firms; interest rate, inflation rate and  growth domestic product rate, significantly affect returns on assets and Tobin’s Q of listed manufacturing firms in Kenya; and corporate governance, financial characteristics and  macroeconomic factors were good predictors of listed manufacturing sector firms’ performance.

Keywords: Firm performance, corporate governance, financial characteristics, macroeconomic factors, manufacturing firms, Nairobi securities exchange

DOI: 10.7176/RJFA/10-22-08

Publication date: November 30^th 2019