The Moderating and Joint Effects of Firm Size on Corporate Governance and Financial Performance: Empirical Evidence from Construction and Allied Firms Listed on the Nairobi Securities Exchange

To support Kenya’s Bottom-up Economic Transformation Agenda (BETA), listed construction and allied firms receive substantial resources for national infrastructure projects, despite persistent operational and financial challenges. This study examined the moderating and joint effects of firm size on the relationship between corporate governance characteristics and financial performance among construction and allied firms listed on the Nairobi Securities Exchange (NSE). Using a ten-year panel regression framework, the study tested hypotheses on firm size as a moderator and joint predictor alongside directors’ remuneration, board composition, and board meetings. The study was anchored on Agency, Stakeholder, and Firm Characteristics theories and adopted a descriptive longitudinal design, inferential statistics, and a census of four listed firms. Bamburi Cement PLC, Crown Paints Kenya PLC, East African Cables PLC, and East African Portland Cement PLC. Secondary panel data spanning ten years from 2015 to 2024 were gathered from audited financial statements using a structured secondary checklist and analysed using STATA Version 18. The moderated panel regression model yielded a statistically significant overall fit ) with an overall coefficient of determination ( ) of 39.84%. The interaction term between directors' remuneration and firm size was positive and statistically insignificant at the 5% p-level ( , ), indicating that larger asset scale exacerbates the positive profitability impact of unaligned executive compensation. The null hypothesis was not rejected. The joint multivariate regression model demonstrated statistical significance , ) with an overall of 33.976%. Directors' remuneration ( , ) and board meeting frequency ( , ) maintained significant negative direct relationships, while firm size exerted a significant B positive scale advantage ( , ). The null hypothesis was rejected. Firm size significantly moderates and jointly influences financial performance, requiring governance practices, compensation, and meeting frequencies tailored to scale.