Non-financial Factors Influencing Financial Distress Of Firms Listed At The Nairobi Securities Exchange

Abstract

The purpose of this study was to investigate whether non-financial factors matter in predicting financial distress with a keen look at firms listed at the Nairobi securities exchange. The study was grounded on six objectives; to determine the effect of ownership of the firms on financial distress of firms listed on the NSE, to establish the effect of size of organization on financial distress of firms listed on the NSE, to establish the effect of growth opportunities on financial distress of firms listed on the NSE, to determine the effect of firm category on financial distress of firms listed on the NSE, to establish the effect quality of human capital on financial distress of firms listed on the NSE and to determine the effect of length of period in the market on financial distress of firms listed on the NSE. Three theories will further form basis for the study; industrial organisation theory, pecking order theory, contingency theory and agency theory. The study adopted a descriptive research design while targeting all the 68 firms listed at the NSE. The research will analyze secondary panel data on the study variables from the individual company publications including company profiles, annual reports and financial statements and reports from the industry regulators. The data collected for a period of 10 years. Descriptive analysis will be applied in profiling the financial distress of the NSE firms. The Altman Z-score model was used to assess the financial distress in the listed firms while the RE probit model was used to evaluate the nature of relationship between the independent and dependent variables. The validity of the study model was to establish through an F-test. The findings were presented in tables and graphs.