RELATIONSHIP BETWEEN COMPANY CHARACTERISTICS AND STOCK RETURN OF COMPANIES LISTED IN NAIROBI SECURITIES EXCHANGE
Abstract
The major objective for all listed companies is to work towards maximizing shareholders wealth. To achieve this, companies continuously make optimal decision to continuously increase capital gain and expected return. Company performance can be influenced by various specific company characteristics. Even though company characteristics have influence on stock returns of listed companies there are empirical disparities on how stock return responds to changes in company characteristics. The main objective of this research was to establish the relationship between company characteristics and stock return of companies listed in Nairobi Securities Exchange. Specifically, the study sought the relationship between size effect, value effect, profitability, investment strategy and stock return among listed companies in Nairobi Securities Exchange. The study was based on agency theory, signalling hypothesis, efficient market hypothesis and stakeholder’s theory. Correlation research design was adopted in the study. Census approach of 53 listed companies from December 2011 to December 2016 was adopted. Descriptive statistics, correlation and regression analysis were used to analyse the data. Results of the study revealed positive and significant relationship between value effect, size effect, profitability, investment strategy and stock return on companies listed in Nairobi securities exchange. There is need for efficient utilization of company resources so as to minimize agency and monitoring costs among other company costs to ultimately maximize and increase shareholders wealth.
Key Words: size, value, profitability, investment strategy, stock return
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i2.701
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