Effect of Asset Structure on Financial Performance of Listed Companies at Nse

Abstract

The research investigated effect of asset structure on financial performance of quoted firms in Nairobi securities exchange. Various researches wereexamined to inform the study though most of these studies provided conflicting literatures sparking the need for further research to fill the existing gap. The significance of assets to organisations has also drawn the attention of the researcher to establish the significance assets to the financial performance of firms. Three theories have been brought forward to explain the relevance of research. These theories include agency theory, lifecycle theory and static trade off theory. The firm’s financial performance was measured using return on equity and assets while asset structure was measured using fixed asset turnover and current asset turnover. Data was collected from seventeen listed companies from commercial and service sector and energy and petroleum sector for a period of seven years i.e. 2011-2017. The researcher used SPSS to perform data analysis. The research used both inferential and descriptive statistics where inferential statistics consist of regression and correlation analysis.The results from the analysis indicated that there’s a strong (R = 0.713) association between the asset structure and financial performance of listed firms at NSE. The research findings showed that return on fixed asset and current assets can be applied in making predictions of financial performance of listed firms at NSE. The significance value of 0.005 from the ANOVA results shows that the model was significant at 5% significance level with an F-ratio of 3.258. The model ANOVA analysis hence show the capability of the independent variables in providing explanations of about 73% of total variation in financial performance. The research concluded that asset structure positively influence financial performance in a significant way. Finally, the research recommended prudent use and management of assets to increase firm value. Firms should employ cash to meet their intended obligations and to ensure operations continue unabated. There’s hence need for diligence in spending resources for economic benefit.Finally, the researcher suggests similar studies be done for an extended period of time incorporating additional accounting and financial variables while considering macroeconomic factors in the country in addition to the four conditions discussed in chapter two. It’s also ideal that future studies advance research on effect of asset structure on financial performance of quoted companies across other securities exchange markets both in developed and developing states to discover the trends and make comparison for policy formulation.