Influence of Corporate Governance Practices on the Financial Performance of Investment Firms Trading at the NSE

Purpose: The purpose of the study was to assess the influence of corporate governance practices on the financial performance of investment firms trading at the Nairobi Securities Exchange (NSE). Methodology: The present study employed a correlational research methodology and positivist philosophy to investigate the impact of firm-specific characteristics on the financial performance of sixty-three investment businesses that were listed on the Nairobi Securities Exchange (NSE) between 2014 and 2023. NSE, CBK, and KNBS were among the secondary sources from which data was gathered using a census technique. The links between corporate governance, risk management, portfolio diversification, and asset allocation were examined using panel regression models, with diagnostic tests guaranteeing the accuracy of the data. Additionally, the moderating influence of ownership structures was assessed, and the results were displayed through the use of statistical analysis software such as SPSS. The information was also shown using tables and figures. Findings: The analysis of corporate governance practices among NSE-listed investment firms highlighted the rarity of CEO duality and diverse board compositions, with boards averaging 5.29 members. Leverage showed significant variability, increasing until 2022 before declining, while board sizes gradually grew over the study period, reflecting enhanced governance focus. Regression analysis confirmed a positive and statistically significant relationship between governance practices and financial performance indicators like ROA, ROE, and composite performance. Unique Contribution to Theory, Practice and Policy: Firms should focus on establishing clear governance structures, ensuring effective oversight by the board of directors, and implementing robust internal controls. Promoting transparency and accountability in operations, along with regular reviews of governance practices to align with best practices and regulatory requirements, will enhance decision-making, increase investor confidence, and improve overall financial outcomes.