| dc.description.abstract | This study analyzed the extent of correlation between accounting ratios and
market based performance measures (stock return and risk) of selectedcompanies
quoted at the Nairobi Stock Exchange.
The paper is divided in several chapters. The first chapter introduced the topic of
study. The second chapter gave a description of the accounting ratios and market
based variables as well as empirical studies on risk, return and accounting ratios
as well as gaps in the work already done.
Finally the study tested empirically the hypothesis established. Although the
basic methodology was the one used in Timo etal (1997), located on the USA, in
addition to the analysis, I considered the individual and incremental information
content of short and long-term adjustments. Due to the probable bias that the
combination of accounting and stock-market information" in the variables would
produce, it used several accounting variables (Net asset value per share, return
on equity, current ratio, earnings per share, dividend yield and payout ratio) As
an extension of the basic methodology, it gave an all market summary and
another per sector analysis of descriptive statistics.
The empirical study was located at Nairobi Stock Exchange, and focused on a
sample of fifty firms quoted at Nairobi Stock Exchange from 1996 to 2001 as
representative of Nairobi Stock Exchange (NSE).
From data analysis, the findings of this study did indicate that there exists a
general association between the firm's accounting ratios and its stock return and
risk, but the association is structurally unstable and that the accounting variables
making up the relationship vary along time.
The magnitude of a cross-sectional variation that accounting ratios did not
explain indicate that accounting ratios do not contain sufficient information
about investors' opinions to effectively measure the risk of equities with extreme
exposure to non-accounting determinants. | en |
