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The moderating role of firm characteristics on the relationship between free cash flows and financial performance of firms listed at the Nairobi securities exchange

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  • Evans Agala Mutende
  • M. Mwangi
  • J.M. Njihia
  • D.E. Ochieng

Abstract

This paper sought to find out the influence of firm characteristics on the relationship between free cash flows and firm financial performance. Specifically, the objectives of the study were two-fold: first, to establish the relationship between free cash flows and financial performance of firms listed at the NSE; and secondly, to determine the influence of firm characteristics on the relationship between free cash flows and financial performance of firms listed at the NSE. The firm characteristics considered in this study are firm size and age. The study used secondary panel data which was obtained from all firms listed at the NSE for the period 2006 to 2015. Regression analysis was employed in data analysis. Results indicate that free cash flows have a significant positive effect on financial performance; while firm characteristics have a negative significant moderating effect on the relationship between free cash flows and financial performance. The main academic contribution of the study is that free cash flows have a positive statistically significant effect on financial performance. The study recommends that firm managers, shareholders and practitioners should focus more on the need for firms to generate more FCF. Â JEL Classification numbers: G30, L25

Suggested Citation

  • Evans Agala Mutende & M. Mwangi & J.M. Njihia & D.E. Ochieng, 2017. "The moderating role of firm characteristics on the relationship between free cash flows and financial performance of firms listed at the Nairobi securities exchange," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 6(4), pages 1-3.
    • Handle: RePEc:spt:fininv:v:6:y:2017:i:4:f:6_4_3
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    References listed on IDEAS

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    Cited by:

    1. Kahihu Peter Karugu & Wachira D. Muturi & Stephen M. A. Muathe, 2020. "Market Risks, Firms’ Size and Financial Performance: Reality or Illusion in Microfinance Institutions in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(11), pages 118-118, November.
    2. Okeke, Clement, 2024. "Effect of Information and Communication Technology (ICT) on Financial Performance of Listed Consumer Goods Firms in Nigeria," MPRA Paper 121293, University Library of Munich, Germany.
    3. Madaleno Mara & Bărbuţă-Mişu Nicoleta, 2019. "The Financial Performance of European Companies: Explanatory Factors in the Context of Economic Crisis," Ekonomika (Economics), Sciendo, vol. 98(2), pages 6-18, December.
    4. AKINTUNDE, Adewale John. & LAMBE, Isaac, Ph.D. & DANIEL, Emmanuel Kayode, Ph.D., 2024. "Effect of Management Techniques and Financial Performance of Listed Manufacturing Firms in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(2), pages 1912-1937, February.

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    More about this item

    Keywords

    Free cash flows; Firm characteristics; Moderation; Financial performance; Nairobi Securities Exchange.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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