Firm Characteristics, Tax Planning and Financial Performance of Commercial and Service Firms Listed at The Nairobi Securities Exchange, Kenya
DOI:
https://doi.org/10.53819/81018102t2563Abstract
Commercial and service firms listed at the Nairobi Securities Exchange, Kenya have over the years been faced with issues of declining financial performance. The study sought to examine the effect of firm characteristics on financial performance of commercial and service firms listed at the Nairobi Securities Exchange, Kenya. The moderating effect of tax planning on the relationship between firm characteristics and financial performance of commercial and service firms listed at the Nairobi Securities Exchange, Kenya was further established. In line with the rationale for the study, explanatory research design was adopted. Panel data were used and consequently panel regression analysis was employed. The study concluded that liquidity and firm age exert insignificant effect on financial performance. Firm size registered a significant effect on financial performance. The study established that tax planning plays an insignificant role in the relationship between firm characteristics and financial performance. In view of the negative firm size effect, firms are recommended to put in place measures geared towards minimizing bureaucratic inefficiencies associated with asset expansion while leveraging technology to improve operational efficiency. Rather than just asset expansion, growth strategies should also prioritize productivity and optimal resource utilization so as to maximize the benefits of economies of scale attributed to firm size. Further studies can be conducted in view of the insignificant direct effects established with regards to liquidity and firm age as well as the moderation effect of tax planning. Additional studies can re-examine the effects of liquidity and firm age on financial performance of commercial and service firms listed at the Nairobi Securities Exchange, Kenya focusing on whether the relationships are non-linear rather than linear. The moderation effect model had firm characteristics as a composite variable, further studies should disaggregate firm characteristics so as to capture specific effects based on separate interaction of tax planning with each component.
Keywords: Firm Age, Firm Characteristics, Firm Size, Liquidity, Profitability and Tax Planning
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