Corporate Social Reports of Firms Listed in the Nairobi Securities Exchange, Kenya

This article explores the corporate social reports of companies listed in the Nairobi Securities Exchange, Kenya. This exploratory study aimed at establishing if there is any form of corporate social reporting practiced in Kenya, the extent and mode of reporting, guidelines commonly followed by companies in the preparation and presentation of the corporate social reports and the quality of information disclosed in the corporate social reports. The study revealed that there is some form of corporate social reporting practiced in Kenya. The reports were found, to be of low quality, lacking in completeness, uniformity and reliability. Most of the reporting was done in the annual reports in the corporate governance section. Only two companies prepared separate stand alone reports. The reports primarily focused on issues on education, health and social and philanthropic activities. All the information reported was good news and no bad news was disclosed. Key words: Corporate Social Reporting, Corporate Annual Reports

Test of Endowment and Disposition Effects under Prospect Theory on Decision-Making Process of Individual Investors at the Nairobi Securities Exchange, Kenya

This study examined investment simulations on investors in the Nairobi Securities Exchange by adopting the Prospect Theory developed by Kahneman and Tversky in 1979. It revealed that the process of investment decision making deviates from standard finance principles and is based on “Behavioral Economics Theory”. The study tested and identified two effects namely: the endowment effect or the tendency to become attached to assets even when better investment opportunities emerge and the disposition effect that is the tendency to sell assets that have gained value (winners) and keep assets that have lost value (losers). The study concluded that both endowment and disposition effects influenced the decisions made by individual investors. The gender, length of trading in the stock market and consulting financial investment advisors had no effect on endowment effect. Further, the study concluded that endowment effect is motivated by a higher regret of commission than regret of omission by investors. Key words: behavioral finance, market efficiency, prospect theory, investor psychology, Nairobi Securities Exchange, Keny

Prospect Theory: Test on Framing and Loss Aversion Effects on Investors Decision-Making Process At the Nairobi Securities Exchange, Kenya

Twenty years of experimental and empirical research has demonstrated that markets are not as efficient as perceived to be. Investors are not rational and risk preferences are stochastic. In addition to this, prospect theory criticized the standard expected utility hypothesis used to describe utility and investor performance preferences. Kahneman and Tversky in 1979 proposed a new framework to model the utility and risk preferences of investors. This study examined investment scenarios with individual investors indicating that the process of making investment decisions is based on the behavioral economics theory which uses the fundamental aspects of the prospect theory developed by Kahneman and Tversky. The study tested two items: firstly framing which modifies the investment decision depending on the perspective given to the problem and secondly loss aversion which refers to a scenario where greater utility is lost when losing x amount of money than the utility that is gained when obtaining the exact same amount. The study concluded that framing effects influenced the decisions made by individual investors and individual investors had their investment decisions affected by loss aversion. Key words: Investment decisions, prospect theory, framing effects, loss aversion, Nairobi Securities Exchange, Keny

Pharmaceutical Manufacturing Companies in Kenya and Their Credit Risk Management Practices

The pharmaceutical industry in Kenya consists of manufacturers, distributors and retailers, who all actively support the Ministry of Health and other key players in developing the health sector. Kenya spends about 8% of its GDP on health. Trade credit is created whenever a supplier offers terms that allow the buyer to delay payment. This study aimed at to identifying the credit risk management practices adopted by pharmaceutical manufacturing firms in Kenya. The study found out that the two most important factors considered in establishing a credit policy are the financial stability of the customer and the existing credit policy. Majority of the firms do not have a credit policy manual. The most widely used credit risk management practices are use of debt collectors letters of credit, credit insurance and factoring of debt  in that order. In dealing with difficult to pay customers nearly all firms put the account on hold and stopped future sales till the account was settled, (80%) engaged services of debt collectors, (43%) resorted to selling on cash basis. The 6C’s model of credit appraisal was widely used. Key words: credit risk, credit risk management, pharmaceutical firm

Effect of Liquidity and Dividend Pay-out on Financial Performance of Deposit Taking Sacco’s in Kenya

Capital structure is one of the fundamental aspects to the success of Deposit Taking Savings and Credit Cooperative Societies.The study aimed to investigate the effect of two capital structure determinants; liquidity and dividend payout, on financial performance as measured by Return on Assets of Deposit Taking Savings and Credit Cooperative Societies, in Kenya. The study was grounded on the Pecking order and  Free cash flow capital structure theories. The study utilized a mixed research design using primary and secondary data for the period 2013 to 2017. The population of the study was 174 Deposit Taking Savings and Credit Cooperative Societies. Stratified and purposive sampling technique was employed. A regression model was used to analyze the data. Results revealed that liquidity and dividend pay-out had a significant and positive effect on the financial performance of Deposit Taking Savings and Credit Cooperative Societies in Kenya. The study recommends having in place an Assets and Liabilities  Committee in each Deposit Taking Savings and Credit Cooperative Society that would help manage the assets and liabilities of the institution, ensuring adequate liquidity and cashflow management. Having in place a robust dividend policy is also critical

Effect of leverage and firm size on financial performance of deposit taking savings and credit cooperatives in Kenya

Critical to the success of financial institutions' performance is there Capital Structure. The study aimed to, investigate the effect of two capital structure determinants, leverage, and firm size on financial performance as measured by Return on Assets of Deposit Taking Savings and Credit Cooperative Societies in Kenya. The study was grounded on Tradeoff, Pecking order, and Mogdiliani and Miller capital structure theories. A positivist approach was adopted utilizing a mixed-method research design. The population of the research study was 174 Deposit Taking Savings and Credit Cooperative Societies from whom primary and secondary data was collected. A stratified and purposive sampling technique was employed. Descriptive statistics and a regression model were used to analyze the data. The results revealed that firm size had a significant and positive effect on financial performance, whereas Leverage, had a significant but negative effect on financial performance. The study recommends having in place an Assets and Liabilities committee in each Deposit Taking Savings and Credit Cooperative Society that would help manage the assets and liabilities of the institution, ensuring sound liquidity and cash flow management. Critical factors that contribute to a firm size such as increased membership, deposits mobilization amongst others need to be addressed

Effect of Liquidity and Dividend Pay-out on Financial Performance of Deposit Taking SACCOs in Kenya

Capital structure is one of the fundamental aspects to the success of Deposit Taking Savings (DPS) and Credit Cooperative Societies (CCS) as it influences the realization of its objectives and goals. The study intended to determine the effect of two capital structure determinants; liquidity and dividend payout, on financial performance as measured by Return on Assets of DPS and CCS, in Kenya. The study was grounded on the Pecking order and  Free cash flow capital structure theories. The study utilized a mixed research design using primary and secondary data for the period 2013 to 2017. The population of the study was 174 DPS and CCS. Stratified and purposive sampling technique was employed. Descriptive statistics and a regression model were used to analyze the data. Results revealed that liquidity and dividend pay-out had a significant and positive effect on the financial performance of DPS and CCS in Kenya. The study concluded that liquidity and dividend pay-out play a significant role in the financial performance of DPS and CCS. The study recommends having in place an Assets and Liabilities  Committee in each DPS and CCS that would help manage the assets and liabilities of the institution, ensuring adequate liquidity and cash flow management. Having in place a robust dividend policy that addresses; the basis of the rate of payments and activities that would require funding of which internally generated funds by way of dividend retention, is also critical.   

An Empirical Analysis of Macro-Economic Influences on Corporate Capital Structure of Listed Companies in Kenya

Abstract Capital structure is an important aspect of financial management however the influence of macroeconomic factors in the determination of capital structure is to some extent underresearched. This article analyzes the influence of the macro economic factors on the capital structure of selected listed companies in Kenya. The article through analytical and descriptive research design aimed at determining the magnitude and the direction of the relationship between selected macroeconomic variables on corporate capital structure of listed companies in Kenya. An econometric model of multiple linear regressions was used where leverage (debt ratios) was regressed against GDP growth rate, inflation and interest rate. The study revealed that indeed macro economic factors have pronounced influence on the capital structure of the listed companies. GDP growth rate was found to have a positive influence on long term debt ratio and a negative influence on total debt ratio and short term debt ratio. Inflation on the other hand had a negative influence on the short term debts while interest rates as measured by the treasury bills have a positive influence on the long term debt ratio and total debt ratio and a negative influence on the short term debt ratio. JEL classification numbers: E44, E0

Impact of Rights Issue on Share Returns of Firms Listed on The Nairobi Securities Exchange, Kenya

DOI: 10.9790/487X-1908075462The study establish the impact of rights issue on share returns of firms listed on the Nairobi Securities Exchange. The study adopted an event study methodology which attempted to establish the information content of rights issue on share returns. The population of this study was 18 companies listed in the NSE. Secondary data collected spans 7 years from 2005-2012; share prices for 30 days before the announcement of rights issue and 30 days after the announcement date was used to generate actual returns, expected returns and abnormal returns. T test analysis was used to test whether there was significant difference on returns between the two periods before and after announcement date. Following the study findings, it was possible to conclude that the market return is a good predictor of stock returns hence the market model was validated. Finally, results led to the conclusion that the expected returns as well as the market returns were significantly higher after rights issue than before rights issue. However, abnormal returns were not significantly different implying that the information content of rights issues do not affect stock return and this may be an indicator of market efficiency. The unique contribution of the paper is that it will reduce the inconclusiveness that has been observed in empirical studies focusing on impacts of rights issue on stock return

Influence of bank stability on the financial performance of commercial banks in South Sudan

Despite increasing bank competitiveness within the country for the past half-decade there has been scant literature examining their stability in the face of the numerous internal factors and economic shocks. Hence the current research aims to determine if bank stability has any effect on commercial bank’s fiscal performance in South Sudan. The study was guided by the CAMEL model metrics (ROA and ROE) in measuring stability and its influence on the monetary performance of commercial banks. SPSS 23 was used to carry out subsequent descriptive and inferential statistical analysis. The study was primarily grounded on the CAMEL model.  The correlation tests indicated that asset quality had a strong positive effect on monetary performance of commercial banks p= .784; a strong positive effect of management efficiency p= .758 and liquidity p= .620