Intangible Assets and Efficiency of Firms Listed on the Nairobi Securities Exchange, Kenya
DOI:
https://doi.org/10.53819/81018102t4401Abstract
Listed firms play an integral role in economic growth by promoting industrialization, creating jobs, and enhancing value addition through raw material processing. These firms contribute to national output, export growth and supply chain development. However, over the last decade, majority of these firms have experienced declining efficiency with a decline in average ROA and over 40% of firms issuing profit warnings between 2015 and 2020, operational cost ratios persistently ranging between 68% and 85%, and multiple firm delisting during 2016–2023 linked to sustained underperformance. This study therefore sought determine the effect of intangible assets on efficiency of firms listed on NSE, Kenya. The study was underpinned by Tobin’s Q theory and Trade-Off Theory. Positivist philosophy and explanatory research design informed the study. The target population included all the 66 firms listed on NSE over the study time scope 2013-2024. This study adopted a census approach targeting the 66 firms listed on NSE and used panel data with listed firms at the Nairobi Securities Exchange serving as the unit of analysis. Data analysis was carried out using a combination of descriptive measures, bivariate correlation tests and econometric panel regression models. The findings the study found out that human capital return on investment (β = 0.153309, p = 0.004) had positive and significant effect on efficiency. The study however found that intangible asset ratio (β = –0.06422, p = 0.042) and had negative and significant effect on efficiency. The study thus recommends that, firms should manage intangible assets with greater strategic discipline. In addition, since intangible-heavy asset structures do not automatically translate into improved efficiency, managers should ensure that intangible investments are fully integrated into operational systems.
Keywords: Intangible Assets, Firm Efficiency, Human Capital Return on Investment, Intangible Asset to Total Assets Ratio, Nairobi Securities Exchange.
References
Abdullah, H., & Tursoy, T. (2023). The effect of corporate governance on efficiency: evidence from a shareholder-oriented system. Iranian Journal of Management Studies, 16(1), 79-95.
Abu, N., Obi, B., Karim, M. Z. A., Gamal, A. A. M., Sakanko, M. A., & David, J. (2024). Long-term impact of FDI-corruption interaction on domestic investment in Nigeria. Economic Alternatives, 30(2), 273-292. https://doi.org/10.37075/EA.2024.2.04
Ahmad, G. N., Lestari, R., & Dalimunthe, S. (2017). Analysis of effect of profitability, assets structure, size of companies, and liquidity to capital structures in mining companies listed in Indonesia stock exchange period 2012-2015. JRMSI-Jurnal Riset Manajemen Sains Indonesia, 8(2), 339-354. https://doi.org/10.21009/JRMSI.008.2.09
Akorede, H. (2023). Advertising and efficiency: insight from a competitive market in Africa. Measuring Business Excellence. https://doi.org/10.1108/MBE-11-2022-0130
Alabdullah, T. T. Y. (2023). Capital Market Companies in the UAE: Determinants and Factors Affecting The Performance Of Listed Uae Companies. Cashflow: Current Advanced Research on Sharia Finance and Economic Worldwide, 3(1), 1-18. https://doi.org/10.55047/cashflow.v3i1.791
Almeida, H., Campello, M., & Weisbach, M. S. (2004). The cash flow sensitivity of cash. The Journal of Finance, 59(4), 1777–1804. https://doi.org/10.1111/j.1540-6261.2004.00679.x
Azamat, K., Galiya, J., Bezhan, R., & Nurdana, Z. (2023). The impact of intangible assets on the value of FMCG companies worldwide. Journal of Innovation & Knowledge, 8(1), 100330. https://doi.org/10.1016/j.jik.2023.100330
Bach, I. N. (2024). Corporate Governance Practices And Financial Performance Of Commercial Banks Listed At The Nairobi Securities Exchange In Kenya (Doctoral Dissertation, Kenyatta University).
Bahodurov, J., Khoshimov, V., & Alsaoub, N. (2025). The Joint Impact of Industrialization and Foreign Direct Investment on Economic Growth: Evidence from Asian Countries. American Journal of Industrial and Business Management, 15(1), 175-223. https://doi.org/10.4236/ajibm.2025.151010
Baltagi, B. H. (2005). Econometric Analysis of Panel Data (3rd ed.). John Wiley & Sons. https://doi.org/10.1007/978-3-030-53953-5
Baltagi, B. H. (2021). Econometric analysis of panel data (6th ed.). Springer.
Banerjee, A., Ariz, D., Turyasingura, B., Pathak, S., Sajjad, W., Yadav, N., & Kirsten, K. L. (2024). Long-term climate change and anthropogenic activities together with regional water resources and agricultural productivity in Uganda using Google Earth Engine. Physics and Chemistry of the Earth, Parts A/B/C, 134, 103545.
Banerjee, S., & Pradhan, R. P. (2024). Research methodology in economics and finance: Emerging approaches. Journal of Economic Methodology, 31(1), 45–60. https://doi.org/10.1016/j.pce.2024.103545
Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do U.S. firms hold so much more cash than they used to? The Journal of Finance, 64(5), 1985–2021. https://doi.org/10.1111/j.1540-6261.2009.01492.x
Chen, M. C., Cheng, S. J., & Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital, 6(2), 159–176. https://doi.org/10.1108/14691930510592771
Chung, K. H., & Pruitt, S. W. (1994). A simple approximation of Tobin’s q. Financial Management, 23(3), 70–74. https://doi.org/10.2307/3665623
Cockburn, I., & Griliches, Z. (1988). Industry effects and appropriability measures in the stock market’s valuation of R&D and patents. American Economic Review, 78(2), 419–423. https://doi.org/10.3386/w2465
Creswell, J. W., & Creswell, J. D. (2022). Research design: Qualitative, quantitative, and mixed methods approaches (6th ed.). Sage Publications.
Crick, J. M., & Crick, D. (2023). Regional-level coopetition strategies and company performance: evidence from the Canadian wine industry. Entrepreneurship & Regional Development, 1-30. https://doi.org/10.1080/08985626.2023.2238671
Eze, A. J., Inyiama, O. I., & Ezugwu, C. I. (2024). Current assets management and operational performance of consumer goods firms in Nigeria. International Journal of Financial and Accounting Research, 12(1), 101–114. https://doi.org/10.37745/ejbir.2013/vol12n26783
Ferdaous, J., & Rahman, M. M. (2019). The effects of intangible assets on firm performance: An empirical investigation on selective listed manufacturing firms in DSE, Bangladesh. American Journal of Business, 34(3/4), 148-168. https://doi.org/10.1108/AJB-11-2018-0065
Ganesha, H. R., & Aithal, P. S. (2022). Choosing an appropriate data collection instrument and checking for the calibration, validity, and reliability of data collection instrument before collecting the data during Ph. D. program in India. International Journal of Management Technology and Social Sciences, 7(2), 497-513. https://doi.org/10.47992/IJMTS.2581.6012.0235
Hsiao, K. L. (2014). Nanofluid flow with multimedia physical features for conjugate mixed convection and radiation. Computers & Fluids, 104, 1-8. https://doi.org/10.1016/j.compfluid.2014.08.001
Huang, H., Ali, S., & Solangi, Y. A. (2023). Analysis of the Impact of Economic Policy Uncertainty on Environmental Sustainability in Developed and Developing Economies. Sustainability, 15(7), 5860. https://doi.org/10.3390/su15075860
Ikayo, E. R. (2022). Influence of Current Asset Structure on Financial Performance of Construction and Allied Firm Listed at the Nairobi Securities Exchange (Doctoral dissertation, University of Nairobi).
Jibril, H., Kaltenbrunner, A., & Kesidou, E. (2025). Financialisation and intangible assets in emerging market economies: evidence from Brazil. Cambridge Journal of Economics, beaf003. https://doi.org/10.1093/cje/beaf003
Jibril, R. S., Usman, A. M., & Abdullahi, A. A. (2023). Impact of Firm Attributes on Efficiency Of Listed Deposit Money Banks in Nigeria. TSU-International Journal of Accounting and Finance, 2(1), 81-99.
Kariuki, M. I. (2021). Effect of Efficiency on Financial Performance of Cement Firms Listed at the Nairobi Securities Exchange, Kenya. IOSR Journal of Economics and Finance (IOSR JEF), 12(4), 32–41.
Kim, H. Y., & Lee, S. J. (2024). Board Composition and Market Transparency in Asian Listed Firms. International Journal of Corporate Governance, 12(2), 75–89.
Kothari, C. R. (2004). Research methodology: Methods and techniques (2nd ed.). New Age International Publishers.
Kothari, C. R., & Garg, G. (2022). Research methodology: Methods and techniques (4th ed.). New Age International Publishers.
Kraus, A., & Litzenberger, R. H. (1973). A state‐preference model of optimal financial leverage. The Journal of Finance, 28(4), 911–922. https://doi.org/10.1111/j.1540-6261.1973.tb01415.x
Kumar, P., & Zattoni, A. (2023). Corporate governance, ownership, and firm performance. Corporate Governance: An International Review, 31(2), 187–201.
Lewellen, W. G., & Badrinath, S. G. (1997). On the measurement of Tobin’s q. Journal of Financial Economics, 44(1), 77–122.
Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. The Review of Economics and Statistics, 47(1), 13–37. https://doi.org/10.2307/1924119
Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. Review of Economics and Statistics, 47(1), 13-37.
Liu, H., & Wang, Z. (2022). Inventory Efficiency and Firm Performance: Evidence from Emerging Markets. International Journal of Financial Studies, 10(2), 33–47.
Makri, C., & Neely, A. (2021). Grounded theory: A guide for exploratory studies in management research. International Journal of Qualitative Methods, 20, 16094069211013654. https://doi.org/10.1177/16094069211013654
Makri, M., & Neely, A. (2021). Grounding research design in theory for explanatory studies. Journal of Management Studies, 58(6), 1535–1543.
Meeker, W. Q., Escobar, L. A., & Pascual, F. G. (2021). Statistical methods for reliability data. John Wiley & Sons.
Mkansi, M., & Acheampong, E. A. (2012). Research philosophy debates and classifications: students’ dilemma. Electronic journal of business research methods, 10(2), pp132-140.
Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20(1-2), 293–315. https://doi.org/10.1016/0304-405X(88)90048-7
Ross, S. A. (1973). The economic theory of agency: The principal’s problem. The American Economic Review, 63(2), 134-139.
Sahoo, G. K., Swain, R. K., & Das, M. C. P. (2022). Does Disclosure Of Intangible Assets Influence Efficiency And Value Of The Firm: An Empirical Study On Nse-500 Companies.
Sarfraz, M., Ozturk, I., Yoo, S., Raza, M. A., & Han, H. (2023). Toward a new understanding of environmental and efficiency through corporate social responsibility, green innovation, and sustainable development. Humanities and Social Sciences Communications, 10(1), 1-17. https://doi.org/10.1057/s41599-023-01799-4
Saunders, M., Lewis, P., & Thornhill, A. (2023). Research methods for business students (9th ed.). Pearson Education.
Shin, H. H., & Soenen, L. (1998). Efficiency of working capital management and corporate profitability. Financial Practice and Education, 8(2), 37-45.
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737–783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
