Relationship Between Firms’ Financial Performance and Stock Return for Firms Listed at Nairobi Securities Exchange
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Date
2016Author
Ngunjiri, Ndirangu
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
The aim of this study was to examine the relationship between financial performance and
stock returns for firms listed at the Nairobi Securities Exchange (NSE). The study used a
descriptive research design and targeted a population of 67 firms listed at the NSE. The
study used only secondary data, which covered a period of 5 years from 2011 to 2015.
The study employed Ordinary Least Square (OLS) Regression method to estimate the
market model parameters (to be used in determining residual effect). The study also
adopted multivariate correlation analysis to establish the correlation between financial
performance and stock return. The correlation results found a significant positive
correlation between financial performance, share price levels and stock returns but found
an insignificant positive correlation between dividend payout ratio and stock returns of
the listed firms. The results of the regression coefficients found an insignificant positive
relationship between financial performance, share price levels and dividend payout
(DPR) and stock returns of firms listed at the NSE. The study concluded that there is a
direct relationship between financial performance and stock returns hence an increase in
financial performance of the listed firms increases stock returns of firms listed at the
NSE. The study also concluded that shares prices and dividend payout has a direct impact
on stock returns hence an increase in shares prices and dividend payout increases stock
returns of listed firms. The study recommends that the management of firms listed at the
NSE should strive to improve the financial performance and develop an optimal dividend
payout policy, which maximizes the returns of their firms.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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