Profit Warning Announcements and the Security Prices of Companies Listed on the Nairobi Securities Exchange, Kenya

Abstract

Business plays a significant role in prosperity in society and creates resources that permit social development and welfare. The market price of its securities measures the worth of business. Thus, security prices show how a company, through its commercial operations, actively contribute to progress in an economy. However, this is not the case for NSE N20 share index, which, in 2015, 2016 and January 2017 experienced price declines, prompting this study investigated the effect of Profit Warning Announcements on the Security Prices of companies listed on the NSE, Kenya. The study applied the Signaling Theory, the Efficient Market Hypothesis, and the Market Expectation Theory. It used the Event Study Methodology that employed a mixed Research Design and Longitudinal Research and administered a questionnaire and interview schedules to collect data from ten listed companies. The study used parametric statistical techniques - the ANOVA and to analyze data and test the hypothesis. The study concluded that Profit warning Announcements did not affect the performance of Securities Prices of companies listed on the NSE, Kenya. This study will guide the market activities and provide a better understanding of how Profit warning Announcements affect 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 Profit warning Announcements on the performance of security prices of specific companies that were affected by the price declines.