FIRM-LEVEL DETERMINANTS OF INVESTMENT ON CASH FLOW SENSITIVITY OF NON-FINANCIAL FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE

Abstract

Firm level factors are important determinants of investment cash flow sensitivity of firms in both developed and developing economies. Nonetheless, the effect remains unclear, and how the firm level characteristics of Kenyan non-financial firms influence their investment cash flow sensitivities is unexamined and unknown.  Various firm level factors affect the investment cash flow sensitivity of non-financial firms. This study sought to determine the effect of firm level determinants and investment cash flow sensitivity of Non-financial firms listed at NSE. The study was guided by the Agency Theory, the pecking order theory and the free cash flow theory and adopted the descriptive research design with a target population of 48 Non-financial firms listed on the NSE as at 31 December 2021. Secondary data was collected by use of data collection sheet from the financial statements and annual reports of the listed companies. The data was analyzed with the aid of the SPSS (Version 23) software and by use of descriptive statistics, correlation and regression analysis. The study revealed that firm level determinants have a significant effect on investment cash flow sensitivity of Non-Financial firms listed on the NSE. It recommends that the board of management of the listed firms should ensure that proper risk management strategies are put in place to guide financial investment decision. Additionally, the Capital Market Authority (CMA) as a regulatory body of the listed firms at NSE should put in place effective regulatory frameworks that outline business risk practices of the listed firms.