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Relating Company Size and Financial Performance in Agricultural Firms Listed in the Nairobi Securities Exchange in Kenya

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  • Samuel Kanga Odalo
  • George Achoki
  • Amos Njuguna

Abstract

Company/firm size is among the many variables that is significant in assessing the profitability of a company. Therefore, this paper seeks to evaluate the effect of company size on the financial performance of listed agricultural companies in Kenya. The theory of economies of scale that links benefits arising from company size, cost management and production volumes was utilized. Secondary data was extracted from the annual reports comprising of financial statement from the period 2003 to 2013 and analyzed using a pooled OLS model. Company size was measured using the total assets (Log of assets) while financial performance was measured by return on assets (ROA), return on equity (ROE) and earnings per share (EPS). The regression results present the goodness of fit for the regression between log total asset and ROA, ROE and EPS as 0.112, 0.113 and 0.074 respectively. The overall model of ROA, ROE and EPS was significant with F statistic of 9.334, 11.096 and 5.901 respectively. The relationship between log total asset and financial performance measures was positive and significant for ROA (b1= 0.033, p value, 0.003) and ROE (b1= 0.049, p value, 0.001) and. EPS (b1= 3.866, p value, 0.018). These results indicate that company size as measured by total assets affects financial performance of agricultural companies listed in NSE positively and significantly. Company size had positive and statistical significance on all the three indicators of the financial performance disclosing that large companies were found to have a competitive advantage over small firms.

Suggested Citation

  • Samuel Kanga Odalo & George Achoki & Amos Njuguna, 2016. "Relating Company Size and Financial Performance in Agricultural Firms Listed in the Nairobi Securities Exchange in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(9), pages 34-40, September.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:9:p:34-40
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    References listed on IDEAS

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    1. Fariborz Damanpour & Richard M. Walker & Claudia N. Avellaneda, 2009. "Combinative Effects of Innovation Types and Organizational Performance: A Longitudinal Study of Service Organizations," Journal of Management Studies, Wiley Blackwell, vol. 46(4), pages 650-675, June.
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    Cited by:

    1. Kennedy A. M. Gichira & Prof. Isaac M. Nkari & Dr. Catherine K. Kaimenyi, 2023. "Green Human Resource Management Practices and Performance: Testing the Moderating Role of Firm Size Using Evidence from Firms Listed on the Nairobi Securities Exchange, Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 292-301, November.
    2. Yifan Xie & Yingkai Fang & Dengjun Zhang, 2022. "How Environmental Performance Affects Financial Performance in the Food Industry: A Global Outlook," Sustainability, MDPI, vol. 14(4), pages 1-18, February.
    3. Qi Ban & Huiting Zhu, 2023. "Quality of Mandatory Social Responsibility Disclosure and Total Factor Productivity of Enterprises: Evidence from Chinese Listed Companies," Sustainability, MDPI, vol. 15(13), pages 1-22, June.
    4. Lehenchuk, Serhii & Raboshuk, Alina & Valinkevych, Nataliia & Polishchuk, Iryna & Khodakyvskyy, Volodymyr, 2022. "Analysis of financial performance determinants: evidence from Slovak agricultural companies," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 8(4), December.
    5. Andreea Barbu & Gheorghe Militaru & Dana Corina Deselnicu & Ştefan-Alexandru Catană, 2021. "Key Success Factors That Enable IT Service Providers to Achieve Organizational Performance: Evidence from Romania," Sustainability, MDPI, vol. 13(19), pages 1-20, October.
    6. Retno Martanti Endah Lestari & Wahyudin Zarkasyi & Ida Farida, 2020. "The Influence of Biological Asset Accounting Policies and Corporate Governance Practices on the Financial Performance: Moderating Role of Knowledge about Renewable Energy," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 615-622.
    7. Lehenchuk, Serhii & Raboshuk, Alina & Zhyhlei, Iryna & Zakharov, Dmytro & Fedoryshyna, Lidiia, 2023. "Financial performance determinants of Ukrainian agricultural companies in the pre-war period," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 9(4), December.

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    More about this item

    Keywords

    company size; financial performance; agricultural firms; Nairobi securities exchange; return on assets; return on equity; earnings per share;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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