Effect of demutualization on the financial performance of the financial and investment firms quoted at the Nairobi Security Exchange (NSE)

Abstract

This purpose of this study was to establish the effect of demutualization and how the performance of the financial and investments companies listed at the NSE was impacted. The study used event research design. The study adopted descriptive and inferential statistics to find out the relationship between demutualization and its effect on the performance of the financial and investment companies quoted at NSE. In this case secondary data was collected from the NSE. The data collected was analyzed using statistical methodology and SPSS software was used in the analysis and later supported by use of tables and charts.

Regression analysis was conducted to empirically determine whether independent variables were a significant determinant of effects of demutualization. Regression results indicated the goodness of fit for the regression between independent variables and dependent variable is satisfactory. An R squared of 0.398 indicates that 39.8% of the variances in ROE are explained by the variances in the independent variables. ANOVA results indicated that the overall model is significant. Thus implied that the independent variables did a good job at predicting return on equity.

From the study, it was possible to conclude that there was an increasing trend in return on assets over the five years. Results also led to conclusion there was a decreasing trend in market price to book value ratio. The same declining trend was observed in growth of assets. However, there was no clear trend in the leverage ratio. Results also led to the conclusion that there exists a significant and positive correlation between return on equity and market price to book value and also between return on equity and leverage. Furthermore, it was possible to conclude that the correlation between the dummy of demutualization was positive and significant.