What Determines Financial Performance? An Insight of Market and Firm level attributes in Tanzania

Abstract

Financial performance is a key indicator of a firm's stability, prompting many corporations to regularly evaluate their performance. The study was conducted to investigate the influence of market and firm-level determinants on the financial performance of non-financial firms listed on the Dar es Salaam Stock Exchange (DSE). The study was guided by four specific objectives which confined on the interest rate and foreign exchange rate as market determinants, while firm size and leverage were considered as firm-specific factors. Additionally, the study included GDP as a control variable. The analysis was conducted on a sample of eleven (11) companies for five (5) years, drawn from a population of twenty-eight (28) listed firms. This study analyzed data by using E-View software version 12 whereby random effect Panel regression model used. The study has found interest rate and firm size has a positive influence. Foreign exchange rate has a no influence while Leverage has a negative influence on the financial performance of the non-financial firms listed at DSE. The study recommends listed companies should reduce reliance on debt financing while focusing on scaling firm size.  Bank of Tanzania and Capital Market and Security Authority should enforce prudent borrowing practices and maintain favorable lending rates. Investors should prioritize firms with lower leverage and firm size when consider buying stock. Future research should consider a broader range of factors, including government effectiveness, control of corruption, political stability, regulatory environment, technological advancements, market competition, and corporate governance, for a more comprehensive analysis.

Keywords: Interest Rate, Foreign Exchange Rate, Firm Size, Leverage, Return on Asset