The Effects of Covid-19 Pandemic on Stock Performance for Firms Listed at the Nairobi Securities Exchange

Abstract

This study sought to determine the effect of Covid-19 pandemic on stock performances. In determining the effect, the research considered other variables. The control variables are exchange rates, stock trade volumes and the days to 2019 dividends book closure. The study adopted a quantitative approach where quantitative data was collected and analyzed through regression. The study used the natural logarithm of share prices to represent stock performance and the number of company shares traded in a day to represent share trade volume. Number of days to 2019 dividends was used to measure the effect of dividends declaration on share prices while real exchange rates were used to measure exchange rates. The effect of COVOD 19 was measured by number of days since the first case was announced. The data was collected for 30 days since the first case was announced and eliminated weekends as the market closes for the weekend. The study results have indicated that except for the exchange rates, the other variables under study affected share performance negatively. For a unit increase in COVID 19 effect, stock performance reduced by 0.203 while for a unit increase in trade volume, it reduced by 0.136 units. The study also established that for a unit increase in days to 2019 (last trading period) dividends, there was a decrease in stock performance by 0.998, which was the highest absolute effect. In exchange rates, a unit increase in exchange rates increased stock performance by 0.036, which was the lowest absolute effect. Except for the exchange rates, all other variables had a significant effect on stock performance as measured by their p-values. The p-values were 0.000 for both trade volume and days to 2019 dividends but 0.042 for effect of COVID 19 pandemic. The insignificant exchange rate p-value was 0.592. The four variables were found to be responsible for up to 32.36% of the changes in stock performance. This shows that there are other factors, which account for the remaining 67.64% of the changes in stock performance. The study findings are adequate to advice on key matters relating to stock performance. The results are helpful to investors and other interested stakeholders like policy makers and researchers. Using the results, policy makers will be able to develop well-informed policies on reducing effects of pandemics on stock performance and help cushion investors in the NSE. This will also make NSE a safe market to deal with.