Voluntary Disclosure and Stock Market Return of Non-Financial Firms Listed on the Nairobi Securities Exchange

Abstract

Voluntary disclosure is empowering the public to get more informed about the company and portrays how the organization wants the outsiders to perceive it in their decision-making process. Voluntary disclosure provides information beyond the compliance requirement by the law. This study examined the effect of voluntary disclosure on stock market return of non-financial firms listed on the Nairobi Securities Exchange. The study adopted positivism as data collection and hypothesis development and testing was achieved. The study used quantitative research design to correlate study variables using mathematical analysis methods. The correlation results indicated that voluntary disclosure portrayed a positive association to stock market return. Regression of coefficients of the static model results indicate that voluntary disclosure and stock market return of non-financial firms listed on the Nairobi securities exchange is positively and significantly related. The results implied that there exist a positive and significant relationship between voluntary disclosure on stock market return since their coefficient values were positive. The regression coefficients result of lagged stock market return and stock market return was positively and significantly related. The regression of coefficients results indicate that voluntary disclosure and stock market return is positively and significantly related. The study concluded that voluntary disclosure has a positive and significant effect on stock market return in non-financial firms on the Nairobi securities exchange. Therefore, voluntary disclosure was found to play a significant role in the stock market performance that generated return predictability. These results imply that when more information is disclosed about the firm then the market generating excess returns. Voluntary disclosure of information could facilitate the public to be more confident in the company. The study also shows that voluntary disclosure is relatively correlated with stock returns over time. The study recommends that by taking the voluntary disclosure into account as a significant determinant of stock market volatility in asset price models, investors can enhance their stock returns. The results can also help policymakers’ efforts to stabilize stock market volatility and uncertainty in order to protect investors’ wealth and attract more investors. Keywords: Voluntary Disclosure, Stock Market Return & Non-Financial Firms