PROFITABILITY AND MARKET PERFORMANCE OF STOCKS OF LISTED NON-FINANCIAL COMPANIES IN KENYA

Kevin Mathara Kamau, Dr. Oluoch Oluoch, Dr. Julius Bichanga

Abstract


The market performance of stocks influence investment decision of investors, investors invest in stocks which have high return and are highly liquid. Existing literature is inconclusive whether financial indicators have an effect on market performance of stocks of listed companies. This study was to determine whether profitability has an effect on market performance of stocks of listed non-financial companies in Kenya. The specific objectives of the study were to determine the effect of profitability on market performance of stocks of listed non-financial companies in Kenya and to assess the moderating effect of size on the relationship between profitability and market performance of stocks of listed non-financial companies in Kenya. The study was carried out in non-financial companies listed in the NSE from 2016 to 2021. The study used longitudinal descriptive research design. The study was a census study. The study used secondary data from the company annual audited financial reports and Nairobi Stock Exchange. A fixed effects panel regression model was used to determine the relationship between the study variables. Descriptive analysis and inferential statistics were used in the analysis. The study findings were that profitability, has a positive and significant effect on market performance of stocks of listed non-financial companies in Kenya. Finally, the study finding found that firm size has a positive moderating effect on the relationship between profitability and market performance of stocks of listed non-financial companies in Kenya. The study recommends that investor who want to invest in stocks with high return and high liquidity they should consider profitability in their investment decisions.

Keywords: Profitability, Firm Size, Market Performance, Stocks


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