Effect of Announcement of the Interest Rates Capping Regulation on Stock Prices of Commercial Banks Listed at the Nairobi Securities Exchange

Abstract

This study sought to analyze the announcement effect of the IRCR on stock prices of commercial banks listed at the NSE. Daily opening and closing share prices for the 9 (nine) sampled stocks and the NSE 25 Share Index were extracted from the NSE database and analyzed using MS Excel and SPSS version 21. The study adopted the event study methodology with a 21 days’ event window, that is, 10 days before and 10 days after the event, the event day being 0. Daily abnormal returns for each security, AAR and CAAR for each day were computed. The paired t-test of significance was then computed for both the AAR and CAAR. There was a significant cumulative negative difference in stock prices before and after the announcement. The study therefore concludes that the announcement of the IRCR had an effect on stock prices of commercial banks listed at the NSE.