THE MODERATING EFFECT OF THE EXTERNAL ENVIRONMENT IN THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE AND VALUE OF NON-FINANCIAL FIRMS LISTED AT NAIROBI SECURITIES EXCHANGE MARKET

Abstract

The objective of this study was to examine if the external environment moderated the
relationship between corporate governance and the value of non-financial companies listed
at the Nairobi Securities Exchange Market. The external environment was measured by GDP
growth, interest rates, and inflation rates. The study tested the hypothesis that, there is no
significant moderating effect of external environment on the relationship between corporate
governance and value of non-financial listed companies at the Nairobi securities exchaneg in
Kenya. Panel data was collected from audited financial statements for non-financial listed
companies that had been consistently listed on the Nairobi Securities Exchange for ten years,
from 2010 to 2019. A descriptive design and a positivist approach were employed to
investigate the effects. Following the completion of diagnostic testing, inferential statistics,
particularly correlation and regression analysis, were employed to evaluate hypotheses.
Using correlation and multiple regression analysis, the moderating effect in the relationship
between corporate governance and non-financial company value affecting the selected 29
companies was analyzed further. The external environment had a considerable moderating
effect on the relationship between corporate governance and the value of non-financial listed
companies, according to this study. This research adds to the expanding corpus of financial
empirical research on the external environment's moderating effect on the relationship
between corporate governance and listed non-financial company value, which has yielded
varied results. Non-financial listed companies should strive for effective corporate
governance in their operations and maximize their value by predicting external events,
according to the conclusions of this study.
Keywords: Corporate governance, Agency theory, External Environment, Tobins Q