Effect of Firm Performance on Lagged Investment Decisions of Firms Listed at the Nairobi Securities Exchange in Kenya

Abstract

This study sought to establish the effect of firm performance on lagged investment decisions of firms listed at the Nairobi Securities Exchange in Kenya. Descriptive research design was used and the sample consisted of twenty four firms. The study employed two estimations to the regression; inclusion of past lagged investment decisions followed by first differencing method to test model efficiency and firm fixed effects. The study established that return on assets and assets growth have a positive association with lagged investment decisions, whereas, cash flow negatively affect lagged investment decisions of firms listed at the Nairobi Securities Exchange. The study concludes that there exists an effect of firm performance on lagged investment decisions. The study further recommends that other measures of firm performance should be examined and longer periods should be used to further prove these study findings.