Corporate sustainability, managerial efficiency and financial performance of listed non-financial firms in Kenya

Abstract

Listed firms in Kenya have shown dismal financial performance relative to their global and continental benchmarks. This low financial performance raises pertinent questions about the influence of internal firm strategies, especially sustainability practices on firm financial outcomes, and the role played by internal capabilities like managerial efficiency thereof. This paper therefore sought to establish the relationship between corporate sustainability and financial performance of listen no-financial firms in Kenya, moderating for managerial efficiency. The study sought to investigate whether environmental sustainability, social sustainability and governance sustainability have an influence on financial performance of listed non-financial firms in Kenya, and whether this relationship is enhanced or diminished by firm managerial efficiency. The study identified stakeholder theory, triple bottom line theory and resource based view as its foundational models. The study undertook a quantitative approach, especially longitudinal panel design. The study targeted all NSE-listed non-financial firms. Samples were extracted using census sampling procedure. Data was collected using a data extraction sheet. The data was systematically reviewed from published annual reports of these firms. Such reports included audited financial reports, sustainability reports and corporate governance disclosure reports downloaded from company depositories, NSE website and CMA portal. Econometric methodology, Longitudinal panel regression analysis was conducted using STATA statistical analysis software and results presented in tables. The findings showed that environmental sustainability, measured through green investment ratio, and social sustainability, proxied by community engagement efficiency, both had a positive and statistically significant effect on financial performance. Governance sustainability, proxied by the board diversity index recorded a negative but statistically insignificant relationship with financial performance. The findings revealed further that when managerial efficiency is introduced as a moderating variable, it enhances the positive effects of environmental and social sustainability and the negative association between governance sustainability and financial performance. The study recommends that firms strategically integrate sustainability into operations, regulators strengthen ESG disclosure standards, and boards and managers adopt practices that balance efficiency with sustainable value creation.