Market reaction to shareholders' annual general meeting of companies listed at the Nairobi stock exchange
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Date
2006Author
Banda, Christopher
Type
ThesisLanguage
enMetadata
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The objective of this study was to examine the effect resolutions passed at annual general
meetings (AGMs) on share prices of companies listed at Nairobi Stock Exchange (NSE).
This required: collection of sample of firms that had AGMs; determine the precise day of the
AGMs and make this as day zero; define the period to be studied, in this study we study 30 days
before and after AGMs; compute daily returns for each firm in the sample; calculate market
return; generate market model for estimating normal returns; compare actual returns to expected
returns to generate abnormal return for each day for each firm in the sample; compute for each
day in the event period the average abnormal return for all the firms in the sample; and compute
cumulative abnormal return.
From the data analysis and resulting graphs, it appears that all the companies sampled had an
eventful AGM. The graphs confirm a turning point in residual around the date of AGM for most
of the companies. The findings are that significant movements in returns were observed
periodically, pre and post AGM. Some shares posted either positive or negative abnormal returns
around the AGM dates.
The above findings have implications.~n how efficient NSE is in pricing of securities listed at
that exchange, given that statistically abnormal returns were observed in post and pre AGM in a
number of securities at different dates. Given that a number of issues to be deliberated at AGM
are public information prior to AGM, e.g. confirmation of accounts, election of directors,
dividends payable etc, and one would not expect revision in share prices that result into abnormal
gains or losses. In which case abnormal gains or losses is only realizable if good or bad news
emerges from the AGM.
Citation
A management research project submitted in Partial fulfillment for the requirement of the Degree of master of business administration, Faculty of commerce, university of Nairobi.Publisher
Business Administration and planning