Relationship Between Chief Executive Officer Tenure and Firm Performance: for the Companies Listed at the Nairobi Stock Exchange

Abstract

This study was dedicated to assessing the effect of chief executive officer (CEO) tenure on the performance of companies listed on the Nairobi Stock Exchange (NSE). The study investigated the possibility that the conclusions reached by much of the previous studies, about the impact of CEO’s on firm performance may have been premature. The effect of CEO tenure was tested together with two control variables - size and age of the firm. The population of the study was all the 56 companies listed on the Nairobi Stock Exchange as at 30th June, 2011. A census survey of all these companies was carried out. The financial statements for the listed companies were obtained from the capital markets authority (CMA). This data was analysed using regression analysis. A descriptive analysis for the variables was also done to show the mean values, the median, the percentiles, and the standard deviations. The results were presented in tables and charts. The results of the study showed that CEO tenure had no significant effect on firm performance for firms listed on the NSE. Thus, the study concludes that the tenure of a CEO does not significantly influence its overall performance. According to the results of the study, it does not matter whether a CEO stays for long in a firm or is replaced more frequently.