A survey on the factors that motivate local individual investors to invest in shares of companies quoted at the Nairobi Stock Exchange
This study was undertaken to investigate the factors that motivate local individual investors to invest in shares of Companies quoted at the Nairobi Stock Exchange (NSE).The NSE has made a remarkable growth from a share index of 100 in 1966 to 4678.78 by- the- end of December 2009. Number of shares traded moved from 214.90 billion in January 2009 to 490.81 billion in December 2009 while market capitalization moved from Kshs 831.83 Billion to Kshs 1081.86 Billion over the same period. In this research, a general overview was presented to indicate the broad concern of the study including statement of the problem under investigation, the objective of the study, how the research was conducted and highlights significance visa vis the limitations of the study. The study sample was randomly selected from various individual shareholders who included; MBA students from the University of Nairobi, using closed and . open ended questions in questionnaire. The descriptive research design was adopted and the data collected was analyzed using SPSS version 17, and content & factor analysis and the results presented using descriptive statistics-graphs, charts, tables and percentages. The respondents were subjected to a 10 question Likert scaled questionnaire with the responses measuring the extent of their motivation on each of the listed factor. The scaled responses were spread from a one representing 'Not at all' to a five for 'To a very great extent'. The listed factors were; earning dividends, earning capital gains, Profitability of the company, Liquidity position of the company, the asset structure of the firm, Monetary and fiscal policies of the government, earning bonus , the competitiveness of the company in the industry , the caliber of top management of the company , the responsiveness of the firm to new technology . The most quoted response for all the factors was 'moderate' an average of 30.13% followed by 'To a great extent' at 27.73%. None of the factors except 'Moderately considers Asset Structure of the Company before investing' was quoted overwhelmingly (by over half (50%) the respondents) on one response and the distribution of the percentages per response over any factor were relatively equal. Further from the listed factors, respondents were asked to list any other factors that motivated them to invest in shares in the Nairobi Stock exchange. Diversifying investments was listed by most of the interviewees (21.9%) as the motivating factor behind their investing in the NSE followed by long term investments and savings respectively listed by 18.8% apiece. Improving on own financial performance was a close third at 15.6%. Other factors listed included; the high return on investments, professional management of financial portfolio, thrill of the stock exchange trading and the need to become a shareholder in the trading companies at the NSE. The research findings also revealed that 29% of the respondents felt the future of NSE was promising with another 21 % also saying it was bright if it continued to be run as independently as it is run now. Thirteen percent felt it was volatile and another 11 % thought it unpredictable. Others (16%) felt it was still growing and that it largely depended on the performance of the economy (3%). The remaining 8% felt NSE was a good place for long term investments.