The Effect of Private Equity Investments on Financial Performance of Firms in Kenya

Abstract

Private equity investment has emerged as a key area of focus in the modern corporate world. The study analysed the effect of private equity funds on the financial performance of firms in Kenya. The study utilized a descriptive research design and secondary data was collected from 25 firms that used private equity during the year 2005 to 2017. Statistical Package for SPSS was used to analyze data using descriptive methods, correlation analysis, and regression analysis. Based on the findings, it was established that private equity strategy that was mostly adopted by the firms was venture capital while the least strategy adopted was mezzanine financing. In general, the study established that investment in private equity had statistically significant effect on the financial performance of the firms. Therefore, organizations are recommended to adopt the private equity funds since they boost financial performance. The study also recommended the firms to structure their private equity investment portfolios in a manner that ensures maximum returns at lower risks. Furthermore, the study recommended the government to put in place effective measures to make sure that the economic climate in the country is conducive for the investment in private equity fund to grow.