Moderating Effect of CEO Tenure on the Relationship between Intellectual Capital and Financial Performance of Listed Firms in Nairobi Securities Exchange, Kenya

Abstract

The purpose of this paper was to investigate the moderating effect of CEO tenure on the relationship between intellectual capital and financial performance of firms listed in Nairobi Security Exchange. The longitudinal research design was used. The study targeted 64 firms in Nairobi Security Exchange. Secondary data (financial reports) to obtain financial performance information from 48 firms from Capital Market Authority Statistical Bulletins and Nairobi Securities Exchange Handbook for a period of twelve years from 2006 to 2017. Both descriptive and inferential statistics were analyzed on the data. Pearson's correlation coefficient, multiple regression and research hypotheses were tested using hierarchical multiple regression analysis which was adopted to assess the direct and indirect effects of Innovation Capital on financial performance. The results indicated the significant moderating effect of CEO tenure on the relationship between intellectual capital efficiency and financial performance of listed firms in Nairobi Security Exchange (β= 0.02; ρ<0.05). The CEO tenure is positively associated with the quality in low to moderate tenure. The present study has highlighted the importance of CEOs' tenure in promotion of tactical flexibility in the deployment of intellectual capital components in tandem with the shifting operating environment to impact on firm performance. The results guide CEOs and firm stockholders of listed firms on how to maximize firm performance. Unlike previous studies which focused on developed and emerging economies, this study centered on a developing economy, and the findings are consistent with the propositions of the dynamic capabilities’ theory