Stakeholder Engagement and Financial Performance: Evidence from Corporate Firms Listed on the Nairobi Securities Exchange, Kenya
Keywords:
Stakeholder Engagement, Financial Performance, Returns on Equity, Corporate Firms, Sustainable Business StrategyAbstract
This study examined how stakeholder engagement—specifically communication, collaboration, and inclusivity—affects financial performance of firms listed on the Nairobi Securities Exchange (NSE). It addressed the conceptual and empirical gaps arising from the limited integration of stakeholder engagement in sustainability reporting practices within the Kenyan corporate sector. Guided by stakeholder theory, which posits that a firm’s long-term success depends on effectively managing and balancing the interests of all its stakeholders, not just shareholders, this study employed a panel dataset of 57 listed firms covering the period 2014 – 2023. Fixed-effect regression analysis was used to estimate the effect of stakeholder engagement reporting on financial performance, measured using Returns on Equity (ROE). The results shows that all the three stakeholder engagement dimensions significantly and positively influence financial performance. Stakeholder Communication had the strongest effect (β = 0.1872, p < 0.001), followed by inclusivity (β = 0.1694, p < 0.001) and collaboration (β = 0.0829, p < 0.001). The study relied solely on secondary data extracted from annual financial and sustainability reports, which may not have fully captured the depth of stakeholder engagement practices at the firm level. Future research could incorporate primary data or mixed-method approaches for a more comprehensive assessment. Despite this limitation, the findings provide important insights for regulators and corporate managers seeking to strengthen stakeholder engagement as part of sustainable business strategy. The study offered empirical evidence from an emerging market context on how specific dimensions of stakeholder engagement contribute to financial performance. It filled a notable gap in sustainability reporting literature by demonstrating that communication, collaboration and inclusivity are significant drivers of firm value among listed companies in Kenya.
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