A survey on use of marketable securities by firms quoted at Nairobi Stock Exchange
Abstract
The study set to investigate the use of marketable securities by firms listed at Nairobi
Stock Exchange. This was done with the objective of finding out the extent of use of
marketable securities by managers. The study identifies the motives and factors that
managers consider while choosing marketable securities. The assumption in this study is
that managers maximise return while minimising risk.
Data was collected by structured questionnaires and through examination of annual
report.
The findings were that, firstly, firms hold marketable securities for precautionary purpose
with most firms holding commercial paper. The decision to invest depends on certainty
of the cash flow pattern of the investing firm and also accessibility to capital when need
arises. Secondly, firms that invest in marketable securities regard the investments yield
as very important. The yield is a critical variable because it compares the return from an
investment to the existing market price. It is also relied on in estimating the risk of an
investment. Thirdly, majority of the firms that invest in marketable securities have
specialised department who undertake the investment activities. Some firms consider
investing in marketable securities as part time job and a few outsource this function.
The conclusion is that firms invest in marketable securities for precautionary purpose and
to earn yield till need for it arises. However, amount to hold for precautionary purpose
will depend on individual firms attitude towards risk and the quality of marketable
securities available.
Citation
MBAPublisher
School of Business, University of Nairobi
Description
Master of Business Administration