Asian Journal of Economics, Finance and Management

The study sought to investigate how the characteristics of companies trading at the NSE impact their performance in Kenya. The research was anchored by stakeholders’ theory and efficiency structure theory and liquidity shiftability theory.  The target population was the 12 currently active businesses that are listed on the Nairobi Securities Exchange and a census approach was used. The survey concludes stating the significant effect of operational efficiency on financial stability, underscoring the critical role that efficient operations play in ensuring the long-term viability and performance of firms in the Kenyan market. Therefore, firms that are able to optimize their processes, reduce costs, and enhance productivity are more likely to achieve greater financial stability and resilience in the face of economic challenges. It was concluded that capital levels do not play a significant role in determining the financial stability of the firms. It was concluded that the alteration in the liquidity levels if the firms play an irrelevant role in determining the firms’ financial stability. It was concluded that firm size does not play a significant role in determining the firms’ financial stability. Management of NSE should encourage the development and implementation of industry-wide standards and best practices for operational efficiency in commercial and service firms. The management of NSE should encourage commercial and service firms to adopt robust liquidity risk management practices, including regular monitoring of cash flows, stress testing, and contingency planning. Provide guidance and support to firms in developing effective liquidity risk management frameworks to ensure they are adequately prepared to handle liquidity challenges. The management of NSE should shift the regulatory focus from firm size as a determinant of financial stability to a more comprehensive and risk-based approach.