Effect of Human Resource Contribution and Environmental Aspect of Corporate Social Reporting on Firm Performance: Evidence from Listed Firms in Nairobi Securities Exchange, Kenya

The purpose of this study was to investigate the effect human resource contribution and environmental contribution on firm performance in Nairobi Security Exchange (NSE) Kenya. Legitimacy Theory was used in the study. This research study covered population of 44 firms listed in Nairobi security exchange in Kenya operating consistently in the security exchange during the period 2005­-2010 giving a total of 264 firms’ year observation. Inferential statistics comprised of correlation and regression analysis method. The study findings revealed that Human Resource Contribution and Environmental Contribution have a positive effect on the firm performance. From findings, the study concluded that human resource and environmental issues contributions affect the performance of firms’ particularly environment contribution. The study collective results help to explain why firms should disclose reports. The results also assist CSR practitioners in convincing top management that transparent voluntary environmental disclosures are informative in terms of enhancing firm performance. Keywords: Corporate Social Reporting, Human Resource Contribution, Environmental Contributio

Effect of Credit Risk Management Practices on Lending Portfolio among Savings and Credit Cooperatives in Kenya

Sound lending procedures in financial institutions involve identifying high-risk loan applicants, modifying lending conditions such as security requirements and monitoring repayments. Credit risk management is an emerging activity that lies within Sacco’s. Many researches have attempted to answer the benefits of the credit risk management. However, it has remained unclear for the Sacco’s management on the effects of credit risk management practices on lending portfolio. The purpose of this study was to examine the effects of credit risk management practices on lending portfolio among Sacco’s in Nakuru County, Kenya. Data on risk identification, risk analysis, risk monitoring, risk evaluation and risk mitigation obtained from 59 Sacco’s sampled from among Saccos in Nakuru County were analyzed using regression models to identify its effect on lending portfolio. Results indicate a significant effect of all the risk management practices on lending portfolio except risk evaluation which did not register a significant effect on the lending portfolio of the Sacco’s. The findings further show that majority of the Sacco’s have largely adopted risk management practices as a means of managing their portfolio. Key words: Credit Risk Management,  Lending Portfolio, Savings and Credit Cooperative Societies, Kenya

Effectiveness of Electronic Inventory Systems on Customer Service Delivery in Selected Supermarkets in Kenya

Effectiveness of electronic inventory system is very vital on customer service delivery. Without effectiveness, the customers will judge businesses harshly. The study evaluated the extent to which electronic inventory systems are used by supermarkets in Kenya. It also sought to determine the level to which lead-time variability resulting from the use of electronic inventory systems affects customer service delivery. The study also aimed at evaluating how the service quality created with electronic inventory systems has on customer service delivery in the selected supermarkets. A descriptive survey research design was adopted for the study with a target population of two thousand five hundred and forty nine respondents (2549) of which forty nine (49) were management staff and two thousand five hundred (2500) were customers of the five major supermarkets in Kenya. A census was conducted among the managers and supervisors while a sample of ninety two (92) was picked from the customers making the total sample size for the study three hundred and eighty one (141). For customers, Stratified-sampling design was used to achieve the desired representation from the total population and the sample size for each stratum was allocated proportionately. Data was collected using questionnaires, which were tested for reliability using Cronbach’s Alpha. Data collected was analyzed through Pearson’s correlation and the Chi-square test to test the hypothesis.  From the analysis the researchers established that majority of the supermarket chains had integrated the use of electronic inventory systems which had enhanced effective customer service delivery. Lead time had also been influenced positively the use of electronic inventory systems as well as the quality of service delivery which in turn led to effective customer service delivery.  The researchers recommended continuous improvement on the use of electronic inventory systems to ensure enhanced customer service delivery. Key words: Inventory Holding Cost, Inventory, Lead-time, E-inventory System, Customer Servic

What Is the Effect of Rights Issue on Firms Share Performance in the Nairobi Securities Exchange?

Rights issues give existing shareholders the option of purchasing new shares, normally issued at a discount to the prevailing market price in order to encourage participation in the capital raised over purchasing shares in the market.  This study aimed to identify the effects of rights issue on the share performance of listed Kenyan-based companies on the Nairobi Securities Exchange. The research was to evaluate the effects of rights issue on firms’ subsequent trading  prior to and after the issue.  All the firms listed at the Nairobi Securities Exchange and were part of the NSE 20 share index were considered. In addition to this, all the firms that performed rights issue between 2007 and 2012 were included in the target population whether or not they were part of the NSE 20 share index. Keywords: Rights issue, Nairobi Securities Exchange, Share Performanc

Factors Affecting Liquidity Risk Management Practices in Microfinance Institutions in Kenya

Liquidity is a bank’s capacity to fund increase in assets and meet both expected and unexpected cash and collateral obligations at reasonable cost and without incurring unacceptable losses. Liquidity risk is the inability of a bank to meet such obligations as they become due, without adversely affecting the bank’s financial condition. Sound liquidity management can reduce the probability of serious problems. The study adopted a survey research design. The target population included all the 128 employees from the 6 selected MFIs in Kenya. A sample of 96 employees were drawn and used in the study. Questionnaires were used to collect data from the field. The raw data collected was analyzed using the Statistical Program for Social Sciences (SPSS) Version 21.0. The hypotheses were tested using multiple regression analysis. The study found out that Micro Finance Institutions internal control systems, policies, Board oversight and risk monitoring significantly affects its liquidity risk management practices. The study recommended that established MFIs document their local strategies applied in liquidity risk management; effective internal control processes be introduced through implementation of computerized financial management systems; institutions should employ effective policies that impacts positively on the overall liquidity risk management functions; the Board should develop  initiatives to facilitate review of liquidity management framework and also provide strategic direction to the liquidity risk management function and the MFIs to maintain adequate information systems for measuring, monitoring, controlling and reporting on liquidity risks. Keywords: Liquidity Risk, Micro Finance Institutions, Board oversight and Institutional internal contro

Do Stock Splits Affect Ownership Concentration of Firms Listed at the Nairobi Securities Exchange?

Corporations split their shares in order to make them more affordable to the retail investors. Theoretically, increased buying of the stock post split by retail investors should be experienced. Existing literature on effect of stock splits are from studies conducted in developed markets, much of it focusing on market efficiency. The objective of this study was to analyze the effect of stock splits on ownership structure of listed firms in Kenya. Using a data collection sheet, secondary data was collected from the published financial statements of listed firms, which had conducted stock splits between 2004 and 2010. A Herfindahl- Hirschman Index was used to measure ownership concentration among the top ten shareholders before and after the split. The overall change in ownership structure was analyzed using the Wilcoxon Rank Sum Test at 95% confidence level. The results show that although the ownership structure for the companies in the study significantly changed, the change was generally not in favor of retail investors. Contrary to expectations, the holding by institutional investors significantly increased in most cases, implying that stock splits do not cause enough interest in the shares amongst retail investors to tilt the proportions owned in their favor. To the contrary, stock split encourages retail investors to off load their shares in a bid to lock in profits occasioned by the appreciation in the value of the shares after the split. An important recommendation for market regulators and corporate managers is that a stock split may not be a useful tool for dispersing firm ownership but rather only for improving stock liquidity. Investors looking to buy stocks that have announced a stock split should carefully analyze their information content, because during stock market bubble a split may not convey accurate future prospects for the company. Given the increased demand for stocks when a split is announced, it is an ample opportunity to lock in profits for investors looking to sell their shares. Keywords: Controlling Shareholding; Ownership Concentration; Ownership Structure; Stock Splits; Nairobi Securities Exchang

Effect of Corporate Governance on Financial Performance of SACCOS in Kenya

This study sought to find out the effect of corporate governance on financial performance of savings and credit cooperatives.. The study looked at five theories related to corporate governance namely: agency theory, stakeholder theory, stewardship theory, simple finance model and the political model. It looked at work by others in Kenya, Uganda, Nigeria and Korea. There are 121 Sacco's in Nakuru, out of which there are fifty active Sacco's. The study did a survey of three Sacco's which have the majority of Sacco members. The study targeted all employees of the Sacco's. The study adopted a census method. They were availed to the respondents so that they could fill and return them. The study was carried out between May 2013 and December 2013. The study used Spearman’s rank correlation to analyze and present findings in tables showing percentages, frequency distribution, and also bar graphs, and pie charts. The study found out that there was a significant relationship between financial reporting and financial performance of savings and credit cooperatives. Sacco’s with more frequent financial reporting structures showed better financial performance. The study found out that there was a significant relationship between management style and financial performance of savings and credit cooperatives. Participative management with democratic leadership enhanced the financial performance of Sacco’s. The relationship between size of the board and financial performance was insignificant at 5% significance level. The study recommended that financial reporting should be done as frequently as possible, and management should use a leadership style that is most comfortable to employees and Sacco size should be kept where financial performance is least affected adversely. The study further recommended that studies should on corporate governance be carried out in other areas such as microfinance institutions, commercial banks and the financial sector as a whole

Effects of Securities Behaviour on Performance of Nairobi Securities Exchange Indices

This study aimed at establishing the Influence of investor’s behaviour on the performance of Nairobi Securities Exchange (NSE) indices. A reliable security market index should assist investors in making investment decisions but this is not always the case: investors at times invest in stock whose performance is not reflected in the indices. This study was guided by specific objectives which included: to establish the Influence of momentum effect, financial contagion, white noise effect, Security Price Volatility, and Herding Effect (all as independent variables) on performance of NSE indices as the dependent variable. This study was anchored to finance theories such as random walk theory, rational bubbles theory, smart money and noise trader’s theory, price formation and discovery theory, and information disclosure theories. The study was based on a period of 12 years starting from January 2004 to December 2015. The population of this study comprised of all the market participants at the NSE and thus a census approach was adopted where study period was done based on each specific objective. This research relied on primary data. Primary data was collected from all the market participants. In data analysis, a significance level of 5% was used on all objectives and a multiple regression model on each objective was used. The Statistical Package for Social Sciences (SPSS) was used on primary data for analysis. The findings for primary data showed all the indices to be insignificantly influenced by the securities behaviour but the overall NSE indices performance was statistically affected. Hypotheses were tested at 0.05 level of significance. The first hypothesis on momentum effect was not rejected on primary. The second hypothesis on financial contagion was rejected and.on the hypothesis of white noise effect, it was not rejected. The hypothesis of Security Price Volatility effect was not rejected while hypothesis of herding effect was rejected. It was concluded that all the indices play a complimentary role thus the need for the retention of all. NSE is highly contagious of the events that happen around it. The study recommends that future researchers should increase the respondents to also include investors. For the objective of momentum effect, the study recommends that more exchanges be included to get a finer detail. NSE and CMA should ensure that information availed to the researchers is obtained at minimal cost or for free to encourage more research into the security markets. Keywords: Momentum Effect, Financial Contagion, White Noise Effect, Share Price volality effect, Herding Effect and Nairobi Securities Exchange Indice

What Are the Factors that Influence A Wide Interest Rate Band in Micro-Finance Institutions in Kenya

Interest rates play a significant role of intermediation between savers and potential borrowers.  High deposit rates acts as incentives to attract savings while high lending rates discourage credit demand from potential borrowers.  The margin between deposit rate and lending rate at a given time period forms an interest rate band which has implications on borrowing and deposit mobilization in the economy.  In Kenya, the interest rate band has persistently remained wide despite the efforts to narrow it down.  Several factors have been established that influence this wide interest rate band.  However, this was before the financial reform period when commercial banks dominated the financial sector.  This study was designed to evaluate the factors that influence a wide interest rate band in Micro Finance Institutions (MFIs) is new developments in the financial sector due to financial reforms in the year 2004.  MFI sub sector has contributed to the competitive environment in the credit market.  Factors that influence interest rate bands for these Institutions have not been documented.  Purposive sampling was used to select a sample of 27 MFIs that are registered members of Association of Micro Finance Institutions (AMFI) Kenya and carry out retail Micro Finance activities.  A cause effect research design was applied.  Secondary data was extracted from financial statements using a data collection sheet and a questionnaire used to collect primary data.  Data was collected for a four year period (2005 - 2008) and was analyzed using descriptive statistics.  A censored linear tobit model (Tobit) was used to test the hypothesis.  The results indicated significant differentials between deposit rates and lending rates.  From the findings, four factors; Growth, Financial costs, Profitability and Operating/Administrative costs significantly influenced a wide interest rate band depending on the time period.  Findings from this study are expected to provide information to policy makers for decision making and policy formulation.  The findings are also expected to be beneficial to the Donor community and support groups in their endeavor to promote Micro — Finance activities in Kenya Keywords: interest rate band, Micro Finance Institution, and Interest rate

Influence of Momentum Effect on Stock Performance of Firms Listed in the Nairobi Securities Exchange

This research article intended to establish the influence of momentum effect on stock performance of firms listed in Kenya. Nairobi Securities Exchange (NSE) is the most robust securities market in Eastern and Central Africa and among the best performing in the African continent. Despite this, there is still a lot to be desired in terms of upholding the efficient market hypothesis. Stocks here do not always uphold this theory despite the fact that the NSE is among the few African exchanges that are not weak form efficient. This study looked at all the listed firms in the NSE for the period between January 2004 to December 2015. The research was based on the efficient market hypothesis and behavioral finance theories. Descriptive research design was used and target population was all the listed firms in the NSE. Secondary data was used in the analysis where the researcher used market prices and risk free interest rates. These were obtained from the data vendors at the NSE and website of Central Bank of Kenya. Caharts four factor model was used in the analysis and hypothesis was tested using 0.05 level of significance. The researcher conducted diagnostic tests such as normality, linearilty and collinearity tests. Missing values in the data collected were corrected by the use of linear interpolation. The diagnostic tests showed that the data was good for analysis. Z test results showed that the momentum effect was statistically significant at 0.0165. The model was also statistically significant showing that the momentum effect influenced the returns for NSE at about 25.8%. the null hypothesis was therefore rejected. It was concluded that NSE stocks over the span of 12 years studied demonstrated momentum effect. Future researchers would be advised to study the momentum effect on a shorter span like 12 months where they are working with weekly prices. The researcher would also recommend future scholars to do a regional comparative study