Intangible Assets and Efficiency of Firms Listed on the Nairobi Securities Exchange, Kenya

Listed firms play an integral role in economic growth by promoting industrialization, creating jobs, and enhancing value addition through raw material processing. These firms contribute to national output, export growth and supply chain development. However, over the last decade, majority of these firms have experienced declining efficiency with a decline in average ROA and over 40% of firms issuing profit warnings between 2015 and 2020, operational cost ratios persistently ranging between 68% and 85%, and multiple firm delisting during 2016–2023 linked to sustained underperformance. This study therefore sought determine the effect of intangible assets on efficiency of firms listed on NSE, Kenya. The study was underpinned by Tobin’s Q theory and Trade-Off Theory. Positivist philosophy and explanatory research design informed the study. The target population included all the 66 firms listed on NSE over the study time scope 2013-2024. This study adopted a census approach targeting the 66 firms listed on NSE and used panel data with listed firms at the Nairobi Securities Exchange serving as the unit of analysis. Data analysis was carried out using a combination of descriptive measures, bivariate correlation tests and econometric panel regression models. The findings the study found out that human capital return on investment (β = 0.153309, p = 0.004) had positive and significant effect on efficiency. The study however found that intangible asset ratio (β = –0.06422, p = 0.042) and had negative and significant effect on efficiency. The study thus recommends that, firms should manage intangible assets with greater strategic discipline. In addition, since intangible-heavy asset structures do not automatically translate into improved efficiency, managers should ensure that intangible investments are fully integrated into operational systems. Keywords: Intangible Assets, Firm Efficiency, Human Capital Return on Investment, Intangible Asset to Total Assets Ratio, Nairobi Securities Exchange.