The Impact of the Financial Reporting (Fire) Awards on the Stock Returns of Companies Listed at the Nairobi Securities Exchange

Abstract

A company award is a form of recognition that is given to a company that demonstrates excellence and integrity in its management and governance practices. In theory, the awards enhance a company’s corporate image because the recognition received from the media goes a long way in improving the company’s business as a whole in terms of increased sales which translate to increased profits and in the long run increased shareholders wealth as seen by increase in share prices at stock market. This study was undertaken to establish the impact of the FIRE Award announcements on the stock returns of companies listed at the Nairobi Securities exchange. The main objective of the study was to establish whether participating firms yield significantly different abnormal returns from those of non-participating companies. Data on participating companies was obtained from ICPAK. Daily prices for an eleven days event window were obtained from NSE. The window covered five days before and five days after the announcement of the awards with the announcement day as day zero. The market adjusted returns model was used to compute abnormal returns. The data was analysed using Microsoft Excel 2010 and presented in tables and graphs. The statistical significance of Mean Abnormal Returns (MAR) and Cumulative Abnormal returns (CAR) were also computed using Microsoft Excel 2010. The results show that both MAR and CAR for participating companies are not significantly different from those of non participating companies. The study concludes that the FIRE Awards do not have a significant impact on the stock returns of companies listed at the NSE.