Effects of Earnings Announcement on the Share Price for Firms Listed at the Nairobi Securities Exchange
Abstract
This study was undertaken with a view of establishing whether earnings announcements affect
the stock prices of firms listed at the Nairobi Securities Exchange for the years 2009-2013.The
objective of study was to determine whether the earnings announcements generate abnormal
returns and the duration of abnormal returns of firms listed at the Nairobi Securities Exchange.
Data was extracted from the NSE Daily stock and NSE Handbook 2009-2013 and analyzed using
E-Views and EXCEL. The graphs and the tables confirm a turning point in residual abnormal
returns around the date of earnings announcements for most of the companies in the sample
population. The findings indicate movements around the earnings announcement both pre and
post announcement. These objectives were achieved by studying a sample of 19 firms listed at
the NSE having made earnings announcement in the period of the study. The daily adjusted
prices for the sample stocks were recorded during the event window of 17 days, 8 days before
and after the announcements. The study adopted a descriptive research design. The event study
methodology was employed to determine the effects of the earnings announcement. The sample
population posted both negative and positive abnormal returns around the earnings
announcement dates which show how the stock prices have reacted to the earnings
announcement event. The above findings show that statistically negative abnormal returns were
observed in the post and pre earnings announcements of firms listed at the Nairobi Stock Exchange.
Given that a number of issues to be deliberated at earnings announcements are public information
prior to earnings announcements 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 earnings announcements
Citation
Master of Science in FinancePublisher
University of Nairobi