Drivers of Profitability among Non-Financial Firms listed at the Nairobi Securities Exchange

This study examined the drivers of profitability among non-financial firms listed on the Nairobi Securities Exchange, focusing on financial structure, financial flexibility and non-debt tax shield. A longitudinal panel research design was adopted, using secondary data from 42 firms covering 2015-2024. Panel-data econometric techniques, including diagnostic testing and fixed-effects estimation, were employed, with firm age and the COVID-19 period included as control variables. The final transformed and lagged model explained 68.11% of the variation in profitability. Financial structure exhibited a statistically significant negative effect on profitability (β =-0.102154, p = 0.0010), while financial flexibility had a significant positive effect (β = 0.169435, p = 0.0177). NDTS had a negative but insignificant effect (β = -0.041061, p = 0.2061). The findings highlight the importance of prudent financing decisions and maintaining financial flexibility in enhancing corporate profitability. The study recommends balanced financing strategies that integrate financing capacity and tax considerations.