Abstract
The performance of firms listed on the Nairobi Securities Exchange (NSE) remains
important to economic growth, investor confidence, and capital market stability.
However, empirical findings on the relationship between corporate governance and
firm performance remain inconclusive. This study examined the effect of corporate
governance on the performance of firms listed on the NSE. Guided by a positivist
research philosophy and descriptive-correlational research design, the study
analysed panel secondary data from 63 firms with complete data covering 2014
2025, obtained from published annual reports and reputable financial databases.
Firm performance was measured using Tobin’s Q, while corporate governance was
assessed using board size and board independence. Firm size, financial leverage,
and firm age were included as control variables. Panel regression techniques,
including pooled ordinary least squares, random-effects, and fixed-effects models,
were estimated, with the Hausman specification test guiding model selection. The
findings revealed that corporate governance had a positive and statistically
significant effect on firm performance. The study recommends that listed firms
strengthen corporate governance mechanisms to enhance performance, while
policymakers and regulators promote effective oversight and accountability. The
study contributes empirical evidence to the corporate governance and firm
performance literature in the context of the Kenyan capital market.
Keywords: Corporate Governance, Firm Performance, Board Size, Board
Independence, Tobin’s Q, Nairobi Securities Exchange.
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