Effect of Firm Characteristics on the Financial Performance of Energy and Petroleum Firms Listed in the Nairobi Securities Exchange

Abstract

This study sought to examine the effect of firms traits namely board size, liquidity, firm size, age and leverage on the financial performance .Financial performance is measured by ROA and ROE. Correlation research design is used to find out the effects of firm characteristics on performance of the firm. The study was carried out for all petroleum and energy firms listed at the NSE as from 2010 to 2017.It was evidenced in the study that leverage and board size were statistically significant. The remaining variables were not statistically significant. These were firm size, liquidity and firm age. Firm size and leverage were positively related to firm financial performance. Board size, firm age and liquidity were the only variables that were negatively related to firm financial performance. The study had limitation in terms of scope because it only concentrated on energy and petroleum firms listed in NSE. The study focused only on five traits namely, age, size, leverage, liquidity and board size in establishing performance of the firms at NSE. The study only concentrated on a specific sector of the economy i.e. energy and petroleum. The study recommends the use of proportionate debt financing in relation to total capital financing is profitable, therefore the firms should use debt financing up to a point where any extra debt financing causes net cost to the firms. It should also increase its assets to influence its competitive power.