Assessing the Appropriateness of Classification of Listed Companies by Financial Ratios in Nairobi Securities Exchange
Abstract
The fact that different groups of companies, whether small, new, big, service or
manufacturing receive different classification at the Nairobi Securities Exchange invites
the explanation that different groups must differ according to some discriminating
characteristics valued and considered in the financial market. This study sought to assess
the appropriateness of classification in the Nairobi Securities Exchange using financial
ratios as predictor variables and the sector classification as the existing classification with
the aid of discriminant analysis. From the results, the study concludes that the
classification as done by the NSE is not appropriate and is not adequate as well. The
study also concludes that financial ratios that are common to all listed companies at the
NSE can be used to discriminate the listed companies into the different groups.
Discriminant analysis is also appropriate for classification purposes at the NSE.
Publisher
University of Nairobi
Rights
CC0 1.0 UniversalUsage Rights
http://creativecommons.org/publicdomain/zero/1.0/Collections
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