Effect of right issues on share prices for companies listed at the Nairobi securities exchange
The research examines the effect of right issues on share prices for companies listed at the Nairobi Securities Exchange. The study sampled ten companies in the NSE between years 2009 to 2014 which had announced and made rights issues. The research project examines whether there is any significant effect on the market price and whether the average abnormal returns surrounding the rights issue announcement was statistically different from zero. The study used the market model to determine the expected returns of the various securities and a t-test statistic was used to test the hypothesis. The regression analysis on the research data analyzed for the ten companies reflected a negative price adjustment for companies which issued rights issue. The results show negative abnormal returns after the announcement date of the rights issue. The return analysis thus indicates that there is an impact on the share price return for firms which announced the rights issues for the period under the study. The share price returns showed a decline when compared to the market analysis as shown on the regression analysis. The slight decline in share price returns however has not hindered more companies in the Nairobi Securities Exchange from announcing and issuing rights issues as a source of raising funds.