Drivers of Profitability among Non-Financial Firms listed at the Nairobi Securities Exchange

This study examined the drivers of profitability among non-financial firms listed on the Nairobi Securities Exchange, focusing on financial structure, financial flexibility and non-debt tax shield. A longitudinal panel research design was adopted, using secondary data from 42 firms covering 2015-2024. Panel-data econometric techniques, including diagnostic testing and fixed-effects estimation, were employed, with firm age and the COVID-19 period included as control variables. The final transformed and lagged model explained 68.11% of the variation in profitability. Financial structure exhibited a statistically significant negative effect on profitability (β =-0.102154, p = 0.0010), while financial flexibility had a significant positive effect (β = 0.169435, p = 0.0177). NDTS had a negative but insignificant effect (β = -0.041061, p = 0.2061). The findings highlight the importance of prudent financing decisions and maintaining financial flexibility in enhancing corporate profitability. The study recommends balanced financing strategies that integrate financing capacity and tax considerations. Keywords: Financial Structure, Financial Flexibility, Non-Debt Tax Shield, Profitability, Non-Financial Firms, Nairobi Securities Exchange, Fixed-Effects Model, Panel Data.