The Influence of product diversification and firm characteristics on performance of companies listed at Nairobi securities exchange
Date
2020-08
Authors
Muchiri, Stephen Kamau
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
This study sought to establish the influence of product diversification and firm characteristic on
performance of listed companies at Nairobi Securities Exchange which was guided by three
specific objectives. The first specific objective was to determine the motives of product
diversification on companies listed at the Nairobi Securities Exchange. The second specific
objective was to establish the effect of product diversification on performance of companies listed
in Nairobi Securities Exchange. The third specific objective was to establish the effect of product
diversification and firm characteristics on the performance of companies listed in the Nairobi
Securities Exchange. The study adopted a correlation research design. Census method was used to
study all the targeted population which was the listed firms at the Nairobi Securities Exchange.
Primary data was collected through questionnaires to address the first objective. Secondary data
was collected from the audited financial reports of the listed firms to address the second and the
third objectives. The financial data ranged between 2011 and 2017. The variables being studied
were performance, diversification, size and age of the companies. Descriptive analysis was
employed to analyze both primary and secondary data. The primary role of the model was to
establish the major motives of product diversification. Pearson correlation and Multiple Linear
regression models were employed to establish the effect of product diversification and firm
characteristic on performance. The findings revealed that the major motives of diversification were
to minimize risk and increase tax shield in order to enhance the capacity to borrow and to access
more markets. The second specific objective, both the correlation and regression analysis revealed
that product diversification had a negative significant influence on firm performance. The third
specific objective, the regression analysis results revealed that firm age and firm size as firm
characteristics had a positive significant influence on firm performance. Thus, listed firms which
have advanced in age and have plenty of resources experienced a high degree of performance. The
fourth specific objective, revealed that firm age and firm size has a positive significant influence
on performance of diversified firms. The study was only limited to listed firms at the Nairobi
Securities Exchange. Future studies could consider studying all firms whether listed or not listed
in each sector. Additionally, future studies could distinguish between related and unrelated product
diversification.
Description
A Thesis submitted in partial fulfillment of the requirement for the Degree of Master of Commerce at Strathmore University
Keywords
Product diversification, Securities Exchange, Performance