Effect of Asset Tangibility on Financial Performance of Listed Firms in the Nairobi Securities Exchange
Abstract
The Kenya Government, together with companies and individuals in the private sectors, has put concerted efforts in ensuring the existence of a favorable environment for doing business in the country. Consequently, while some firms listed in the NSE have improved in performance, there are others that have experienced declining fortunes and some have even been delisted from the NSE over the last decade. Significant efforts to turn around such companies or even liquidate them have focused mainly on restructuring of firm level factors. However, managers and practitioners still lack adequate guidance for attaining optimal decision on firm level factors. The specific objectives of the study was to determine the effect of asset tangibility on financial performance of listed firms in the Nairobi securities exchange. The study employed panel research design that is non-experimental in nature. This study targeted all the 64 firms listed on the Nairobi Securities Exchange. A census of all the 64 firms listed in Nairobi Securities Exchange was used as a unit of analysis. Secondary data extracted from the financial statements was used to compute the relevant ratios and encompassed panel data. The study employed a dynamic panel data regression model while ANOVA was used to test the relationship between the variables across the sectors. Test of hypothesis was done at 95% confidence interval. The study found out that there was a positive and significant relationship between asset tangibility and financial performance of financial and non-financial firms. The study concluded that asset tangibility has a positive and significant effect on financial performance of Listed Firms in the Nairobi Securities Exchange. A firm is highly competitive when as its managers are able to mix tangible and intangible assets in the most effective and efficient manner. Therefore, a firm can get the same score of competitiveness by using a different combination of assets and by giving different importance coefficients to the tangible and intangible assets.
Keywords: Asset Tangibility, Financial Performance & Nairobi Securities Exchange
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