Effect of Socially Responsible Investment on Performance of Non-financial firms Listed at the Nairobi Securities Exchange
Abstract
The study intended to establish the effect of socially responsible investment on financial performance of non-financial firms listed at the Nairobi securities exchange, Kenya. The study used a descriptive cross sectional survey approach. The targeted population comprised of non-financial firms listed in Kenya. They were thirty-nine (39) in number as at 31st December 2019. The study employed primary and secondary data. The collection of primary data was done using a structured questionnaire. Multiple regression analysis was then employed to determine how socially responsible investment affects financial performance. It was found out that the non-financial firms adopted SRI practices in their investment decision making. Correlation analysis established that negative screening, norm-based screening, positive screening and return on assets have strong positive and significant correlation. Size of the firm and return on assets having a moderately positive and significant correlation. The implication is that improved consideration of negative screening, norm-based screening, and positive screening lead to improved return on assets. Increased firm size equally leads to increased return on assets. Regression analysis established that R = 0.792 implying that SRI and financial performance of listed non-financial firms are positively related. The adjusted R2 of 0.577 meant that 57.7% of variations in financial performance was caused by variations in norm-based screening, negative screening, positive screening and size of the firm. The overall p-value was significant which depicted that norm-based screening, negative screening, positive screening and size of the firm reliably predicted financial performance of listed non-financial firms at the NSE. The recommendation of the study was that managers of both the listed and the non-listed companies should modify their corporate strategies accordingly owing to the fact that, the findings indicate that SRI affect financial performance of firms. The recommendation is that the managers be up to date on issues regarding SRI and the related concepts.
Keywords: Norm based screening, Negative screening, Positive screening, Financial performance
