Abstract:
This study empirically investigates the effect of firm size on firm financial performance among firms listed on the Nairobi
Securities Exchange over the period 2012–2023. Using a balanced panel of 468 firm-year observations from 39 firms, the
study applies a fixed-effects regression model to control for unobserved, time-invariant firm characteristics that may jointly
influence performance and firm growth. The regression results show that firm size has a positive and statistically significant
relationship with firm performance indicating that increases in firm scale are associated with substantial improvements in
performance within firms over time. In contrast, control variable including firm age exhibits a negative and significant
relationship with performance suggesting that older firms may face maturity-related rigidity or declining efficiency. Firm
leverage is also negative and statistically significant implying that higher debt exposure marginally reduces performance.
Overall, the findings indicate that scaling up is performance-enhancing in this context, but the benefits may be constrained by
ageing effects and leverage-related financial risk. The study recommends that NSE-listed firms should pursue well-governed,
efficiency-focused growth in size while keeping leverage prudent and renewing strategies to avoid age-related performance
decline.
