Drivers of Firm Value: Working Capital Efficiency, Liquidity, and Firm Size. Evidence from Nairobi Securities Exchange, Kenya

The notion of firm value, a central concept in finance, continues to attract remarkable attention and discussion in the field of finance over decades. A notable decline in the value of firms listed at Nairobi Securities Exchange has been observed, following unfavorable inclinations that have led to unpredictable yields of stocks. Empirical evidence shows that there is a link between working capital efficiency, liquidity, firm size and firm value. However, there is inadequate literature to respond to the question on whether these drivers have a mutual effect on firm value. The purpose of this study was to assess the mutual effect of working capital efficiency, liquidity, and firm size on firm value as evidenced from firms listed at Nairobi Securities Exchange. The study adopted panel regression random effect model analysis using data set for 2012-2021. The findings indicate that working capital efficiency, liquidity, and firm size have a statistically significant effect on firm value. The study concluded that it is imperative for firms, especially those that are listed at exchanges, to maintain an optimal balance of the main drivers of firm value in order to enhance the realization of their overall goals. The implication of the study is that regulators of listed companies should be cognizant of the collective elements of WCE, liquidity, and firm size in order to capitalize on firm value. This can be done through sustaining ideal working capital, and liquidity reserves in relation to firm size.