Impact of Covid-19 on the Relationship Between Stock Market Liquidity and Perfomance of Firms Listed at Nairobi Securities Exchange, Kenya

Abstract

The Covid19 pandemic brought a lot of uncertainties and fear not only in the health sector but also among the investors and to the economy at large. This has informed the need to investigate the impact of covid19 on the relationship between market liquidity and stock performance of firms quoted in NSE, Kenya. Market width, market depth and market resilience were considered as the aspects of market liquidity and risk-free rate as a control variable. All firms which are listed in NSE were used as a study population and Nairobi All Share index as a measure of stock performance. Data were obtained from NSE and CBK websites. Descriptive research design was adopted for data analysis. The results revealed that risk free rate directly and significantly affected stock performance. Market depth revealed a direct and significant relationship with stock performance in the year 2019 just before covide19 but had an indirect and insignificant association in the year 2020 when the country was experiencing the scourge of covid19.However, market width and market resilience showed indirect and insignificant effect on the stock performance for the two years. The study concluded that overally, market liquidity had an effect on stock performance and covid19 adversely affected the stock performance. The study therefore recommended that the CBK should be proactive enough and come up with good fiscal policies so as to xiii deal with any unforeseen calamities that may paralyze the normal operations of the economy in Kenya.