The determinants of firm value in the telecommunication sector in Kenya
Kamunde, Johnstone N
MetadataShow full item record
A large strand of theoretical and empirical studies has focused on firm value. Firm characteristics that signify growth opportunities and good governance are generally rewarded by the market, resulting in value premiums for the investors. A firm's value may be affected directly or indirectly by factors related to the nature of the firm. However, most of the studies and research work have been carried out in developed economies and very little is known about the firms value in developing economies in general and Kenya in particular. This study sought to fill-in the knowledge gap by investigating the determinants of firm value of telecommunication companies listed at NSE and specifically focused on cost of capital, operating costs, dividend payout, gearing level and earnings level. Being a descriptive study, the study was conducted on two telecommunication companies listed at NSE: Safaricom ltd and Access Kenya Ltd. Secondary data was obtained from the companies' 5-year annual reports (2006 to 2010). Multiple regression analysis was used to analyze the data obtained at 95% confidence level. The study established that earnings (p=0.149), operating costs (p=0.045) and cost of capital «p=0.140) are positively related with firm value and dividend payout (p=0.124) and gearing ratio (p=0.027) are negatively related with firm value. The study concludes that operating costs are incurred in an effort to generate revenues and if optimally used increases firm value. The study also concludes that ability of the firm to repay debts raises its credit worthiness and growth ability thus higher firm value.