The Effect of Real Estate Finance Portfolio Size on the Stock Performance of Commercial Banks Listed at the Nairobi Securities Exchange
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Date
2013-10Author
Okoth, Morris O
Type
ThesisLanguage
enMetadata
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According to Central Banks of Kenya (CBK) 2010, The Kenyan real estate finance has
grown rapidly over recent years in both value of loans and number of loans. The study is
set out with the objective of establishing the relationship between the real estate finance
portfolio size (Mortgage) and the stock performance (return) of commercial banks listed
at the Nairobi Securities Exchange in Kenya. To achieve the objectives of the study, a
regression model was developed using the stock performance, measured by return, as the
dependent variable and the size of the real estate finance portfolio as the independent
variable as well as the return on equity of the banks as the controlling variable.
The secondary data was collected from published reports by the Nairobi Securities
Exchange (NSE) and the Capital Markets Authority (CMA) and the Central Banks of
Kenya (CBK) reports for a period of five years between 2006 and 2010. The researcher
adopted a survey research design on a target population of all commercial banks, within
the study period, which were 10.
The data collected was analyzed using linear regression analysis conducted at 95%
confidence level. The study used the regression analysis to establish the relationship
between the real estate finance portfolio size and stock return. The results obtained from
the regression model shows that a unit increase in real estate finance size will result in
0.000415 increase in stock returns, all factors remaining constant. Therefore to enhance
shareholder value, the banks should manage the real estate finance as a product and also
use it to improve the banks revenues.
The study concludes and recommends that in view of the findings of other studies that the
amount of mortgage advanced by the listed commercial banks would lead to a high
financial performance and the findings of this study that an increase in mortgage size
causes and increase in stock return, then it would be beneficial for both management of
banks and investors to properly manage the banks’ mortgage portfolio size, all other
factors remaining constant.
Citation
Degree in Masters Of Science in FinancePublisher
University of Nairobi School of Business
Description
A research project report submitted in partial
fulfillment of the requirement of Degree of Master of
Science in Finance, University of Nairobi