Financial Characteristics and Market Value Added for Non-financial Firms Listed at the Nairobi Securities Exchange in Kenya
Kithinji, Denis Kariuki
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This study intended at assessing why in the recent past, market value added for most firms in Kenya has been on a downward streak, and whether their financial characteristics manipulate their market value added, or otherwise. The specific objectives included: to investigate the effect of firms’ total assets, investment strategies, effective tax rate, and assets utilization on firms’ market value added. The study also sought after examining the moderating effect of firm’s capital structure on the relationship between firm’s financial characteristics and market value added amongst non-financial businesses registered at the Nairobi Securities Exchange. The research paper embraced a descriptive research design. This investigation was underpinned by the agency theory, signaling theory, pecking order theory and trade-off theory. The target population was 36 non-financial businesses listed at the Nairobi Securities Exchange. The analysis counted on secondary information amassed from the Nairobi Securities Exchange Handbooks, firms’ financial reports and pertinent publications done by scholars within a similar scope, and overall running of non-financial enterprises registered at the Nairobi Securities Exchange. Statistics were gathered for the time frame in the middle of 2013-2017. Panel regression analysis was used. The verdicts uncovered that effective tax rates had a negative and considerable impression on market value added of non-financial corporations. Further, conclusions divulged that investment patterns had a constructive and foremost effect on market value added of non-financial firms. Though, size of a firm and assets utilization had no significant influence on market value added of non-financial firms. In supplement, the analysis proved that capital composition had a sizable positive moderating effect on the correlation between firm’s monetary traits and market value added amongst non-financial firms. The study concluded that effective tax rates and investment patterns are significant determinants of market value added on non-financial firms. The study advocated that the government should contemplate slashing the tax rates correlated to non-financial firms. The management of non-financial firms should develop apt investment models to guide and inform the way a firm makes key investment determinations. The management should also endeavor to adopt fitting capital mix. The study does a sizeable involvement to policy, philosophy, and practice in the arena of capital markets.