Private Equity and Financial Performance of Investment Firms Listed at the Nairobi Security Exchange in Kenya

Abstract

Financial performance plays a significant role in enhancing investor confidence, attracts capital, and facilitates long-term strategic growth. In Kenya, investment firms listed on the Nairobi Securities Exchange (NSE) are expected to play a pivotal role in capital mobilization, investment channeling, and national economic development.
However, despite access to various investment portfolio, many listed investment firms continue to register inconsistent and often declining financial outcomes. The purpose of this study was to explore the effect of private equity on the financial performance of investment firms listed at the NSE in Kenya. The study was guided by risk-return tradeoff theory.
This study adopted a descriptive research design. Target population for the study was the 5 investment firms listed at NSE in Kenya. Census was used where all the 5 investment firms listed under the investment sector of the Nairobi Securities Exchange (NSE) as at December 2024 was used. This study relied exclusively on secondary data and this data was obtained using a secondary data collection sheet from 2015-2024.
Data was coded and entered into STATA used to perform statistical analysis. Data was analyzed using descriptive and inferential statistics. Descriptive statistics included minimum, maximum, means, standard deviation and variances. Inferential analysis included correlation and panel regression analysis Diagnostic tests including normality, multicollinearity, heteroscedasticity, unit root, Hausman, test of independence of residual and linearity tests were performed to ensure that the assumptions of regression model were not violated.
The overall panel regression results revealed that private equity positively influenced financial performance, with a coefficient of 0.00000112 (p=0.003), demonstrating its effectiveness as a high-return asset class. The study concluded that investment in private equity significantly influenced the financial performance of the investment firms listed at NSE in Kenya. The study recommends that investment firms should adopt proactive management and redevelopment portfolio strategies to enhance capital appreciation, thereby improving the overall financial performance.