Effect of Managerial Ability on Financial Performance of Firms Listed at Nairobi Securities Exchange, Kenya
Main Article Content
Keywords
Financial performance, managerial ability, firms, Nairobi Securities Exchange, Kenya, Nairobi County
Abstract
The performance of firms in Kenya has been underwhelming in recent years due to intense competition, global economic instability, the impact of a strong U.S. dollar, and the lingering effects of the COVID-19 pandemic. Therefore, the study sought to establish the effect of managerial ability on financial performance of firms listed at Nairobi securities exchange. The study was guided by agency theory. The study adopted an explanatory research design and a panel approach to arrive at the study’s conclusions. The total study target population comprised 67 firms listed at the NSE for thirteen consecutive years between the periods of 2011 and 2023. The study’s inclusion-exclusion criteria excluded firms with missing annual financial reports and those firms listed later than the year 2011. As a result, the study surveyed 40 firms for 13 years. Therefore, 520 firm-year observations for the firms listed at the NSE. The study utilized secondary data which was analyzed using both descriptive and inferential statistics. The findings revealed a positive and significant relationship between managerial ability and financial performance. The study also found that firm size has a positive and significant effect on financial performance, while firm age had a negative and significant effect. The study concluded that when firms' total assets increase, firms tend to experience better financial outcomes. Firm age reduces financial performance significantly, implying that mature firms, those that have been in existence for a longer period, tend to perform poorly financially compared to younger firms. Finally, Managers with high abilities are more capable of making strategic decisions, efficiently allocating resources, and responding to market changes, all of which enhance the firm's profitability and overall financial health.
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Mishra, D., & Maheshwari, N. (2025). Elucidating the determinants of crowdsourcing adoption for organisation value creation. International Journal of Organizational Analysis, 33(3), 452-478. https://doi.org/10.1108/IJOA-01-2024-4175
Mitnick, B. M. (2019). Origin of the theory of agency: an account by one of the theory's originators. Available at SSRN 1020378. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1020378
Mossisa, E., & Rao, P. H. The impact of industrial diversification on Ethiopian banks’ profitability. International Journal of Commerce and Management Research. 2(201). http://www.managejournal.com/
Mulyana, A., & Susilawati, E. (2021). Analysis of Influence of Raw Materials Fees and Factory Overhead Costs on Gross Profit. International Journal of Innovation, Creativity and Change, 15(8), 750-761. https://ijicc.net/images/Vol_15/Iss_8/15835_Mulyana_2021_E1_R.pdf
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Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian journal of corporate governance, 10(1), 74-95. https://doi.org/10.1177/0974686217701467
Pham, N. T., Hoang, H. T., & Phan, Q. P. T. (2020). Green human resource management: a comprehensive review and future research agenda. International Journal of Manpower, 41(7), 845-878. https://doi.org/10.1108/IJM-07-2019-0350
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Published
Aug 4, 2025
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How to Cite
Koima, D. K., Kapkiyai , C., & Bonuke , R. (2025). Effect of Managerial Ability on Financial Performance of Firms Listed at Nairobi Securities Exchange, Kenya. Journal of Frontiers in Humanities and Social Sciences, 3(2). https://doi.org/10.69897/jofhscs.v3i2.266
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Author Biographies
David Kipchirchir Koima, Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Eldoret, Kenya
Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Eldoret, Kenya
Collins Kapkiyai , Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Eldoret, Kenya
Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Eldoret, Kenya
Ronald Bonuke , Department of Marketing and Logistics, School of Business and Economics, Moi University, P.O. Box 3900, Eldoret, Kenya
Department of Marketing and Logistics, School of Business and Economics, Moi University, P.O. Box 3900, Eldoret, Kenya