FIRM FINANCIAL INDICATORS AND SHARE RETURNS ON AGRICULTURAL FIRMS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA
Abstract
This study focused on internal and external determinants suspected to cause differences in the share returns. The specific objectives aimed at examining the effects of firm-specific financial indicators on share return of seven Agricultural sector firms listed at the Nairobi Securities Exchange, Kenya. With the moderating variable of effective tax rate, the study sought to analyze the effects of liquidity, leverage, profitability and firm size on share returns of Agricultural firms therein listed. The share return was measured by price earnings ratio. Five theories anchored this study with the aim of grounding it based on scholarly work. Trade-off theory, Agency theory, Capital structure theory, Resource based theory and Tax clientele effect theory. A population study was conducted on all the 7 firms over the 2018-2022 sample period using secondary data, to be obtained using a data capture sheet. Using the Statistical Package for Social Sciences, the collected data, the variables were multiple- regressed to produce descriptive statistics of bivariate relationship. The model was diagnosed for heteroscedasticity, normality of distribution, multicollinearity and linearity. For generalization purposes, significance of the resulting statistics was interpreted with 95% confidence. The study established a statistically significant positive relationship between liquidity, leverage, profitability and firm size on share returns of agricultural firms listed at NSE, Kenya (β=67.1949, p=.0408<0.05; β=77.70727, p=.018<0.05; β=24.849, p=.0241<0.05; β=12.014, p=.022<0.05 respectively). The study further established that tax had a significant moderating effect in the relationship of the Firm Financial Indicators (liquidity, leverage, profitability and firm size) and share returns of agricultural firms listed at NSE, Kenya based on the changes in R2 of 14% after the introduction of tax in the interaction. The research output was expected to advise strategy of investment in the stock markets, enrich academic research and suggest areas for further research.
Key Words: Liquidity, Leverage, Profitability, Firm Size, Nairobi Securities Exchange, Financial Indicators
CITATION: Kilonzo, E. N. (2023). Firm financial indicators and share returns on agricultural firms listed at Nairobi Securities Exchange, Kenya. The Strategic Journal of Business & Change Management, 10 (4), 1407 – 1426. http://dx.doi.org/10.61426/sjbcm.v10i4.2826
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DOI: http://dx.doi.org/10.61426/sjbcm.v10i4.2826
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