Private Equity and Financial Performance of Investment Firms Listed at the Nairobi Security Exchange in Kenya

Financial performance plays a significant role in enhancing investor confidence, attracts capital, and facilitates long-term strategic growth. In Kenya, investment firms listed on the Nairobi Securities Exchange (NSE) are expected to play a pivotal role in capital mobilization, investment channeling, and national economic development.
However, despite access to various investment portfolio, many listed investment firms continue to register inconsistent and often declining financial outcomes. The purpose of this study was to explore the effect of private equity on the financial performance of investment firms listed at the NSE in Kenya. The study was guided by risk-return tradeoff theory.
This study adopted a descriptive research design. Target population for the study was the 5 investment firms listed at NSE in Kenya. Census was used where all the 5 investment firms listed under the investment sector of the Nairobi Securities Exchange (NSE) as at December 2024 was used. This study relied exclusively on secondary data and this data was obtained using a secondary data collection sheet from 2015-2024.
Data was coded and entered into STATA used to perform statistical analysis. Data was analyzed using descriptive and inferential statistics. Descriptive statistics included minimum, maximum, means, standard deviation and variances. Inferential analysis included correlation and panel regression analysis Diagnostic tests including normality, multicollinearity, heteroscedasticity, unit root, Hausman, test of independence of residual and linearity tests were performed to ensure that the assumptions of regression model were not violated.
The overall panel regression results revealed that private equity positively influenced financial performance, with a coefficient of 0.00000112 (p=0.003), demonstrating its effectiveness as a high-return asset class. The study concluded that investment in private equity significantly influenced the financial performance of the investment firms listed at NSE in Kenya. The study recommends that investment firms should adopt proactive management and redevelopment portfolio strategies to enhance capital appreciation, thereby improving the overall financial performance.

Investment portfolio, Financial Performance, Real Estate Properties, Government Securities, Private Equity, Fixed Income Securities, Return on Assets

1. Abeerdeen A.M (2019). Alternatives. Tools for a Diversified Portfolio. Toronto: Aberdeen Asset Management. [Google Scholar] [Crossref]

2. Abubakar, I., & Bello, M. (2022). Fixed Income Investments and Financial Stability of Firms in Nigeria. Journal of Finance and Economics, 10(2), 45–56. [Google Scholar] [Crossref]

3. Acharya, V. V., Gottschalg, O. F., Hahn, M., & Kehoe, C. (2019). Corporate Governance and Value Creation: Evidence from Private Equity. Review of Financial Studies, 26(2), 368–402. [Google Scholar] [Crossref]

4. Adebayo, T., & Obinna, C. (2023). Effect of Government Securities on the Performance of Mutual Funds in Nigeria. Journal of African Financial Studies, 10(2), 73–88. [Google Scholar] [Crossref]

5. African Private Equity and Venture Capital Association (AVCA). (2022). Annual African Private Capital Activity Report. [Google Scholar] [Crossref]

6. Agyemang, K., & Frimpong, R. (2022). The Role of Government Securities in Portfolio Management: Evidence from Ghana. African Journal of Economics and Finance, 14(3), 78–95. [Google Scholar] [Crossref]

7. Al-Matari, E.M, Al-Swidi, A.K and Fadzil, F. H (2014). The Measurements of Firm Performance Dimensions. Asian Journal of Fnance and Accounting 6(1), 24-49. [Google Scholar] [Crossref]

8. Anyanzwa, J. (2024). How bank stocks breathed life into Nairobi Securities Exchange in 2024. The EastAfrican. [Google Scholar] [Crossref]

9. BaFin. (2021). Sustainable Finance and Green Bonds in the EU. Federal Financial Supervisory Authority. [Google Scholar] [Crossref]

10. Baker, M., & Johnson, T. (2021). Private Equity Investments and Organizational Performance: Evidence from Investment Firms in the U.S. Journal of Investment Management, 29(3), 45–60. [Google Scholar] [Crossref]

11. Baltagi, B. H. (2008). Econometric Analysis of Panel Data (4th ed.). New York: John Wiley & Sons. [Google Scholar] [Crossref]

12. Basak, S., & Chhabra, S. (2021). Rethinking the Modern Portfolio Theory: A Behavioral Perspective. Journal of Behavioral Finance, 22(3), 209–221. [Google Scholar] [Crossref]

13. Bhuyan, R., Rashid, M., & Lin, J. (2019). Effect of Alternative Investment on Bank Performance: Evidence from U.S. Banks. Journal of Risk and Financial Management, 12(3), 117. [Google Scholar] [Crossref]

14. Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments (10th ed.). New York: McGraw-Hill. [Google Scholar] [Crossref]

15. Brigham, E. F., & Ehrhardt, M. C. (2017). Financial Management: Theory & Practice (15th ed.). Cengage Learning. [Google Scholar] [Crossref]

16. Capital Markets Authority (CMA). (2023). Annual Report and Financial Statements 2022/2023. Nairobi: CMA. [Google Scholar] [Crossref]

17. Capital Markets Authority Uganda. (2022). Annual Report 2021/2022. [Google Scholar] [Crossref]

18. Central Bank of Kenya (2022). Government Securities Market Performance Report. [Google Scholar] [Crossref]

19. Central Bank of Kenya. (2023). Monthly Economic Indicators Report. [Google Scholar] [Crossref]

20. Centum Investment Company. (2023). Annual Financial Report 2022/2023. Nairobi: Centum. [Google Scholar] [Crossref]

21. Chen, N., Roll, R., & Ross, S. A. (1986). Economic Forces and the Stock Market. Journal of Business, 59(3), 383–403. [Google Scholar] [Crossref]

22. Cheruiyot, J., Aluoch, M., & Ndungu, M. (2024). Portfolio Diversification and Financial Performance of Listed Firms in Kenya. International Journal of Finance and Investment, 11(1), 23–39. [Google Scholar] [Crossref]

23. Cheruiyot, K., Aluoch, R., & Ndung’u, P. (2024). Investment in Government Securities and Financial Performance of Investment Firms Listed at the Nairobi Securities Exchange. African Journal of Business and Management, 14(1), 92–106. [Google Scholar] [Crossref]

24. Cheruiyot, S. K., Aluoch, M. O., & Ndungu, P. (2024). Portfolio Composition and Financial Performance of Investment Companies Listed at the Nairobi Securities Exchange, Kenya. International Academic Journal of Economics and Finance, 4(1), 321-344. [Google Scholar] [Crossref]

25. Cooper, D. R., & Schindler, P. S. (2014). Business Research Methods (12th ed.). New York: McGraw-Hill. [Google Scholar] [Crossref]

26. Creswell, J. W. (2014). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (4th ed.). New York: Sage Publications. [Google Scholar] [Crossref]

27. Creswell, J. W., & Creswell, J. D. (2018). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (5th ed.). New York: Sage Publications. [Google Scholar] [Crossref]

28. Culbertson, J. M. (1957). The Term Structure of Interest Rates. Quarterly Journal of Economics, 71(4), 485–517. [Google Scholar] [Crossref]

29. Donaldson, L., & Davis, J. H. (1991). Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns. Australian Journal of Management, 16(1), 49–64. [Google Scholar] [Crossref]

30. Egyptian Financial Regulatory Authority (FRA). (2022). Annual Report 2022. [Google Scholar] [Crossref]

31. Eisenhardt, K. M. (1989). Agency Theory: An Assessment and Review. Academy of Management Review, 14(1), 57–74. [Google Scholar] [Crossref]

32. EY. (2021). Alternative Investments in the Low Interest Environment. Ernst & Young Global. [Google Scholar] [Crossref]

33. Fabozzi, F. J. (2016). Bond Markets, Analysis and Strategies (9th ed.). New York: Pearson Education. [Google Scholar] [Crossref]

34. Fama, E. F. (1984). The Information in the Term Structure. Journal of Financial Economics, 13(4), 509–528. [Google Scholar] [Crossref]

35. Fama, E. F., & French, K. R. (2015). A Five-Factor Asset Pricing Model. Journal of Financial Economics, 116(1), 1–22. [Google Scholar] [Crossref]

36. Geltner, D., Miller, N. G., Clayton, J., & Eichholtz, P. (2014). Commercial Real Estate Analysis and Investments (3rd ed.). New York: On Course Learning. [Google Scholar] [Crossref]

37. Gilligan, J., & Wright, M. (2020). Private Equity Demystified: An Explanatory Guide (4th ed.). ICAEW Corporate Finance Faculty. [Google Scholar] [Crossref]

38. Githinji, P., & Kimani, J. (2023). Government securities and profitability of investment firms in Kenya. International Journal of Finance and Accounting, 8(1), 112–126. [Google Scholar] [Crossref]

39. Gitman, L. J., Joehnk, M. D., & Smart, S. B. (2020). Fundamentals of Investing (14th ed.). London: Pearson Education. [Google Scholar] [Crossref]

40. Gujarati, D. N., & Porter, D. C. (2020). Basic Econometrics (6th ed.). New York: McGraw-Hill. [Google Scholar] [Crossref]

41. Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251–1271. [Google Scholar] [Crossref]

42. Hendriks, J., & Van Dijk, L. (2022). Impact of Private Equity on Financial Outcomes of Dutch Venture Firms. European Journal of Finance and Economics, 34(1), 89–105. [Google Scholar] [Crossref]

43. Hicks, J. R. (1946). Value and Capital. London: Oxford University Press. [Google Scholar] [Crossref]

44. Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305–360. [Google Scholar] [Crossref]

45. Johnson, M., & Liu, Q. (2021). The Role of Government Bonds in Enhancing Investment Firm Profitability: Evidence from the U.S. Global Finance Journal, 35(3), 211–225. [Google Scholar] [Crossref]

46. Kamau, J., & Njoroge, L. (2024). Influence of Real Estate Asset Allocation on the Profitability of Investment Firms in Kenya. Journal of Finance and Investment, 11(1), 45–59. [Google Scholar] [Crossref]

47. Kaplan, S. N., & Strömberg, P. (2009). Leveraged Buyouts and Private Equity. Journal of Economic Perspectives, 23(1), 121–146. [Google Scholar] [Crossref]

48. Keller, M., & Baum, A. (2022). Evaluating Real Estate Investment Strategies and Firm Profitability in EU Markets. European Real Estate Review, 25(1), 37–52. [Google Scholar] [Crossref]

49. Kirui, D., & Rono, M. (2023). The contribution of fixed income securities on the financial performance of listed firms in Kenya. Kenya Journal of Business Studies, 6(2), 56–70. [Google Scholar] [Crossref]

50. Kothari, C. R. (2004). Research Methodology: Methods and Techniques (2nd ed.). New Delhi: New Age International Publishers. [Google Scholar] [Crossref]

51. Kruschwitz, L., & Löffler, A. (2022). Alternative Investments and Financial Performance of Investment Firms in Germany. European Journal of Financial Research, 19(4), 311–328. [Google Scholar] [Crossref]

52. Markowitz, H. (1952). Portfolio Selection. Journal of Finance, 7(1), 77–91. [Google Scholar] [Crossref]

53. Marope, M., & Phiri, M. (2020). Portfolio Diversification and Pension Fund Performance in South Africa. African Journal of Finance and Investment, 12(3), 145–158. [Google Scholar] [Crossref]

54. Marope, T., & Phiri, K. (2020). Diversification of Pension Fund Portfolios and Performance: Evidence from South Africa. African Journal of Economic Policy, 27(2), 89–104. [Google Scholar] [Crossref]

55. Mensah, K., & Boateng, A. (2023). Private Equity and Profitability of Non-Banking Financial Institutions in Ghana. African Journal of Business and Economic Research, 18(2), 34–50. [Google Scholar] [Crossref]

56. Mensah, P., & Boateng, E. (2022). Private equity and firm performance in Ghana. African Finance Review, 9(4), 215–232. [Google Scholar] [Crossref]

57. Modigliani, F., & Sutch, R. (1966). Innovations in Interest Rate Policy. American Economic Review, 56(1/2), 178–197. [Google Scholar] [Crossref]

58. Moroccan Capital Market Authority (AMMC). (2021). Annual Report 2021. [Google Scholar] [Crossref]

59. Moyo, B., & Sibanda, K. (2021). Impact of Investment Diversification on Financial Performance of Investment Firms in South Africa. African Journal of Business Management, 15(6), 101–110. [Google Scholar] [Crossref]

60. Moyo, S., & Ncube, L. (2022). The Impact of Treasury Bill Investments on the Profitability of Public Investment Firms. South African Journal of Economic Policy, 9(4), 55–70. [Google Scholar] [Crossref]

61. Moyo, T., & Sibanda, M. (2021). Alternative Investment Strategies and Financial Performance of Investment Firms in South Africa. Journal of Finance and Investment Analysis, 10(4), 45–60. [Google Scholar] [Crossref]

62. Mugenda, O. M., & Mugenda, A. G. (2003). Research Methods: Quantitative and Qualitative Approaches. Nairobi: Acts Press. [Google Scholar] [Crossref]

63. Mungai, M., & Mwangi, J. (2021). Effect of Investment Diversification on Financial Performance of Investment Firms Listed at the NSE. Journal of Business and Economic Development, 6(2), 78–87. [Google Scholar] [Crossref]

64. Muriithi, M. K., & Waweru, K. M. (2017). The Influence of Government Securities Investment on the Performance of Pension Schemes in Kenya. European Journal of Business and Management, 9(12), 112–120. [Google Scholar] [Crossref]

65. Mutua, J. M. (2020). The Effect of Financial Management Practices on the Financial Performance of Investment Firms Listed at the Nairobi Securities Exchange. International Journal of Finance and Accounting, 9(3), 78-85. [Google Scholar] [Crossref]

66. Mutuku, A., & Wanjiku, L. (2024). Private Equity and Financial Returns of Investment Firms Listed in Kenya. Journal of African Business Research, 12(1), 33–50. [Google Scholar] [Crossref]

67. Mwakalobo, A., & Mwansasu, A. (2021). Determinants of Financial Performance of Investment Firms in Tanzania: The Role of Diversified Investment Strategies. Tanzania Economic Review, 11(1), 23–38. [Google Scholar] [Crossref]

68. Mwalolo, S. C. (2024). Financial Risk Management and Performance of Investment Firms Listed at Nairobi Securities Exchange, Kenya. Kenyatta University Repository. [Google Scholar] [Crossref]

69. Mwangi, C. (2021). Portfolio Choices and Financial Performance of Listed Firms in Kenya. Journal of Emerging Markets, 7(2), 89–104. [Google Scholar] [Crossref]

70. Mwangi, J., & Wanjiku, N. (2022). The Effect of Investment Diversification on Financial Performance of Investment Firms in Kenya. International Journal of Finance and Accounting, 7(2), 45–52. [Google Scholar] [Crossref]

71. Mwangi, M., & Murigu, J. W. (2015). The Determinants of financial performance in General Insurance Companies in Kenya. European Scientific Journal, 11(1), 288-297. [Google Scholar] [Crossref]

72. Mwangi, P., Wekesa, R., & Cherono, A. (2024). Impact of Fixed Income Investments on Financial Performance of Investment Firms Listed at the Nairobi Securities Exchange. Kenya Journal of Business and Economics, 12(1), 67–83. [Google Scholar] [Crossref]

73. Myers, S. C., & Majluf, N. S. (1984). Corporate Financing and Investment Decisions When Firms Have Information Investors Do Not Have. Journal of Financial Economics, 13(2), 187–221. [Google Scholar] [Crossref]

74. Nabunya, R., & Tumwine, M. (2022). The Effect of Fixed Income Instruments on Financial Performance of Microfinance Institutions in Uganda. East African Finance Journal, 9(2), 101–115. [Google Scholar] [Crossref]

75. Naidoo, R., & Sibanda, D. (2022). Effect of Private Equity Investments on the Financial Sustainability of Investment Firms in Johannesburg. South African Financial Review, 14(4), 122–135. [Google Scholar] [Crossref]

76. Nairobi Securities Exchange (NSE). (2023). Annual Market Report 2023. Nairobi: NSE. [Google Scholar] [Crossref]

77. Nairobi Securities Exchange (NSE). (2023). Market Performance Summary. [Google Scholar] [Crossref]

78. Nairobi Securities Exchange (NSE). (2025). List of Listed Companies. [Google Scholar] [Crossref]

79. Ndirangu, L. W., & Mwaura, P. (2016). Effects of Real Estate Investment on the Financial Performance of Listed Investment Firms in Kenya. International Journal of Economics, Commerce and Management, 4(9), 335-349. [Google Scholar] [Crossref]

80. Ndlovu, T., & Moeketsi, M. (2022). Impact of Real Estate Investment Trusts (REITs) on Financial Returns of Investment Institutions. South African Journal of Business Management, 53(2), 33–47. [Google Scholar] [Crossref]

81. Ngugi, S., & Mutiso, P. (2023). Real Estate Investments and Firm Profitability: Evidence from the Nairobi Securities Exchange. African Journal of Finance, 15(1), 134–150. [Google Scholar] [Crossref]

82. Odhiambo, P., Mutiso, J., & Wanjala, S. (2024). Private Equity and Financial Performance of Investment Firms Listed at the Nairobi Securities Exchange. East African Journal of Business Research, 9(1), 56–72. [Google Scholar] [Crossref]

83. Okonkwo, C., & Chukwuma, I. (2023). Real Estate Investment and the Financial Health of Insurance Companies in Lagos State. Nigerian Journal of Finance and Development, 8(4), 80–95. [Google Scholar] [Crossref]

84. Olando, W. O. (2020). Effect of Real Estate Investment on the Financial Performance of Real Estate Firms Listed at the Nairobi Securities Exchange. International Journal of Business and Social Science, 11(6), 50–66. [Google Scholar] [Crossref]

85. Omondi, S., & Muturi, W. (2021). Relationship Between Investment Portfolio Composition and Performance of Investment Firms Listed in Kenya. Journal of Economics and Finance, 9(3), 32–40. [Google Scholar] [Crossref]

86. Ong, S. E. (2017). Real Estate Investment Trusts (REITs) and their Role In Portfolio Management. Journal of Property Investment & Finance, 35(3), 220-232. [Google Scholar] [Crossref]

87. Orodho, J. A. (2003). Essentials of Educational and Social Science Research Methods: Qualitative and Quantitative Approaches. Nairobi: Masola Publishers. [Google Scholar] [Crossref]

88. Oyedokun, A., Adewale, T., & Johnson, K. (2022). Real estate as a diversification strategy in African capital markets. International Journal of Real Estate Studies, 10(3), 201–220. [Google Scholar] [Crossref]

89. Perrow, C. (1986). Complex Organizations: A Critical Essay. London: McGraw-Hill. [Google Scholar] [Crossref]

90. Phalippou, L. (2020). Private Equity Laid Bare (2nd ed.). Oxford: Oxford University Press. [Google Scholar] [Crossref]

91. PwC. (2023). Emerging Trends in Real Estate: Global Outlook 2023. [Google Scholar] [Crossref]

92. Roll, R. (1977). A Critique of the Asset Pricing Theory’s Tests. Part I: On Past and Potential Testability of the Theory. Journal of Financial Economics, 4(2), 129–176. [Google Scholar] [Crossref]

93. Ross, S. A. (1973). The Economic Theory of Agency: The Principal’s Problem. American Economic Review, 63(2), 134–139. [Google Scholar] [Crossref]

94. Ross, S. A. (1976). The Arbitrage Theory of Capital Asset Pricing. Journal of Economic Theory, 13(3), 341–360. [Google Scholar] [Crossref]

95. Saini, M. (2020). Simplified Research Methods. London: University of Wolverhampton. [Google Scholar] [Crossref]

96. Saunders, M., Lewis, P., & Thornhill, A. (2019). Research Methods for Business Students (8th ed.). Harlow: Pearson Education Limited. [Google Scholar] [Crossref]

97. Schneider, H., & Otto, M. (2022). Fixed Income Instruments and the Profitability of Investment Banks in the Eurozone. European Journal of Financial Analysis, 30(2), 45–62. [Google Scholar] [Crossref]

98. Schneider, T., & Baumgartner, K. (2022). Fixed Income Portfolio Strategies and Organizational Profitability in German Asset Management Firms. European Financial Review, 40(1), 76–91. [Google Scholar] [Crossref]

99. Shanken, J. (1982). The Arbitrage Pricing Theory: Is It Testable? Journal of Finance, 37(5), 1129–1140. [Google Scholar] [Crossref]

100. Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), 425–442. [Google Scholar] [Crossref]

101. Smith, J., & Vanhoucke, M. (2021). Real Estate Investment and Corporate Financial Performance in Developed Economies. Journal of International Financial Management, 29(3), 190–205. [Google Scholar] [Crossref]

102. Sowunmi, F. A., & Omole, D. O. (2022). Revisiting the Liquidity Preference Theory in the Era of Digital Currencies. African Journal of Economic Policy, 29(2), 51–63. [Google Scholar] [Crossref]

103. Stewart, L., & Franklin, J. (2021). The Role of Fixed Income Securities in Enhancing Financial Performance of Investment Firms in the United States. Journal of Financial Economics, 38(2), 120–137. [Google Scholar] [Crossref]

104. Uche, N., & Adebayo, M. (2023). Fixed Income Securities and Financial Sustainability of Pension Funds in Nigeria. African Journal of Investment Management, 15(3), 44–59. [Google Scholar] [Crossref]

105. Uchenna, N., & Okonkwo, L. (2023). The Effect of Private Equity and Bond Investments on Financial Performance of Nigerian Investment Firms. Journal of African Capital Markets, 11(1), 55–68. [Google Scholar] [Crossref]

106. Wachira, J., & Wambugu, S. (2021). Asset Allocation and Performance of Listed Firms in Kenya. Kenya Journal of Economics and Finance, 5(4), 98–110. [Google Scholar] [Crossref]

107. Wambua, M. (2021). Fixed Income Securities and Profitability of Listed Investment Firms. Journal of Finance in Emerging Economies, 4(2), 144–159. [Google Scholar] [Crossref]

108. Waweru, J. (2021). Risks of Private Equity Investments in Volatile Markets. East African Business Review, 3(1), 75–88. [Google Scholar] [Crossref]

109. Waweru, N. M., & Ngugi, G. K. (2014). Influence of Financial Management Practices on the Performance of Investment Firms in Kenya. Journal of Business and Management, 16(3), 101-112. [Google Scholar] [Crossref]

110. Wekesa, A. M., & Otieno, D. O. (2021). The Influence of Treasury Bonds on the Financial Performance of Investment Firms in Kenya. Journal of Finance and Investment Analysis, 10(2), 65–78 [Google Scholar] [Crossref]