Financial planning and analysis and the financial performance of firms listed at the Nairobi securities exchange

Abstract

The study aimed to analyze the effect of financial planning and analysis on the financial performance of firms listed on the Nairobi Securities Exchange. The specific objectives of the study were to examine the effect of financial modelling and analytics on financial performance of firms listed on the Nairobi Securities Exchange, to determine the effect of budget planning on financial performance of firms listed on the Nairobi Securities Exchange, and to assess the effect of forecasting quality on financial performance of firms listed on the Nairobi Securities Exchange. The dynamic capabilities theory, resource-based view, and information asymmetry theory served as the study's guiding theories. The study concentrated on all 64 companies listed on the NSE and used a descriptive research design methodology. Given the small size of the population under investigation, a census was used for this study. Both primary and secondary data were used. Structured questionnaires were utilized to collect primary data. Using a secondary data collection matrix, secondary data on return on assets were gathered from the annual reports of the 64 companies listed on the NSE over a ten-year period, from 2014 to 2024. A pilot study was conducted to validate and pretest the questionnaire. To evaluate validity and reliability, the researcher relied on the views of research specialists. The data collected were analyzed using both descriptive and inferential statistics. Frequency distributions, standard deviations, means, and percentages were used as descriptive statistics. Regression analysis was conducted to establish the relationship between study variables in inferential statistics. The analyzed quantitative data were presented using tables and graphs. The study was considered significant because it provided actual evidence of how FP&A practices, such as financial reporting, forecasting, budgeting, and performance monitoring, enhanced business profitability, efficiency, and long-term survival. The response rate was 93.4% of the respondents. The findings showed there is a significant positive trend towards financial modelling and analytics, budget planning and forecasting quality had moderate effect on financial performance of firms listed at the Nairobi Securities exchange. The study recommends firms listed at the Nairobi Securities Exchange should adopt an integrated approach to financial planning and analysis by strengthening financial modelling and analytics, enhancing budget planning practices, and improving forecasting quality. Future research should consider expanding the scope beyond firms listed at the Nairobi Securities Exchange to include small and medium-sized enterprises (SMEs) and privately owned companies.