Abstract
Security price performance is a significant economic activity which measures the company’s wealth and plays a vital role in economic growth. Security price performance reflects investor perception to earn and grow returns in the future. However, this is not the case for the NSE, Kenya N20 share index, which for the past two to three years experienced declines in security prices prompting this study to investigate the effect of Earnings Announcements on the Performance of Security Prices of companies listed on the NSE, Kenya. The study applied the Dividend Signaling Theory, the Efficient Market Hypothesis, and the Market Expectation Theory. The study used the Event Study Methodology, administered a questionnaire and schedules to collect data from 25 listed companies, and used parametric statistical techniques - the ANOVA and Regression Analysis to analyze data and test the Hypotheses. The study found Earnings Announcements were insignificant at 5 percent significant level; thus, concluded that Earnings Announcements did not affect the Performance of Securities of companies listed on the NSE, Kenya. This study will guide the market activities and provide a better understanding of how to optimize returns. It will enable the policymakers to assess and evaluate the current status and, provide a platform for making reviews, designs, and formulate policies to regulate and control trading activities on the financial markets, contribute to knowledge and strengthen the foundation for further research. Future research should investigate the effects of other events on the performance of security prices of listed companies.
Highlights
Security price performance is an important economic activity which measures a company's ability to increase or decrease the wealth of its shareholders and works as an indicator of the overall health of the economy
The declines are of great concern to investors, the government, and the public at large since a decline in security prices has a negative implication on investors wealth, the value of the firm and the economy. It is on this background that this study investigated the cause of the declines by examining the effect of Earning Announcements on the Performance of Security Prices of the companies listed on the NSE, Kenya
In order to test the effect of Earnings Announcements on the Performance of Security Prices on the NSE, Kenya, this study computed the means before and after the announcements and compared them to determine whether there were changes
Summary
Security price performance is an important economic activity which measures a company's ability to increase or decrease the wealth of its shareholders and works as an indicator of the overall health of the economy. According to Boyes (2011), a rise in security price indicates that the market expectations are revised upward, and, more investors will want to buy the company's securities, and fewer will want to sell them. A fall in security price indicates that the market expectations are revised downward, and, fewer investors will want to buy the company's securities, and more will want to sell the same. According to Modigliani, (1971) proposition, a permanent increase in security prices increases the individual's wealth holdings, and in the higher stable income. This proposition is supported by Bernanke and Gertler (1989) and Kiyotaki and Moore's (1997) argument of the financial accelerator by which stock prices impact output which, refers to the impact that stock prices have on firms' financial statements
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