Portfolio Composition and Financial Performance of Investment Companies Listed at the Nairobi Securities Exchange, Kenya.
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Date
2024-11
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Kenyatta University
Abstract
Stakeholder choices are greatly swayed by potential gains from investment. They generally
lean towards opportunities that promise heftier rewards rather than those that offer lower
returns. The downward trajectory in performance observed in investment firms enlisted on
the Nairobi Securities Exchange shoulders much of the blame for this. By scrutinizing the
interplay between the financial performance of publicly traded investment ventures in
Kenya and the makeup of investment portfolios, this inquiry sought to furnish a response
to this query. The focal point of this inquiry was to assess the influence of portfolio
composition on the profit margins of investment firms featured on the Nairobi Securities
Exchange. Five investment firms listed on the Nairobi Securities Exchange were the
subjects under investigation. To ensure a holistic grasp of the topic at hand, the research
melded principles from other theories, including the Modern Portfolio Theory, Quantity
Theory of Inflation, Capital Asset Pricing Model, Theory of Active Portfolio Management
and the Black-Litterman Theory, to appraise a company's holdings. The scrutiny adopted
a theoretical model to assess a company's holdings. The examination grounded itself on
positivist philosophical tenets and a causal research approach. The five investment firms
listed on the Nairobi Securities Exchange constituted the intended recipients of this inquiry,
which was executed using secondary data procured from the exchange and the websites of
the relevant investment firm. The research study commenced in 2015 and concluded after
an eight-year span, terminating in 2022. To ensure the research was conducted within the
bounds of legality and ethics, Kenyatta University and the National Commission for
Science, Technology, and Innovation both provided their sanction for the study to gather
data. In the data analysis phase, both descriptive and inferential statistics were brought into
play. Descriptive statistics, including standard deviation, mean, and median, were
presented in tables and charts. In terms of inferential statistics, panel regression analysis
and correlation were applied. Prior to executing the panel regression analysis, diagnostic
tests were administered to affirm the assumptions of the panel model. The outcomes
gleaned from the panel data exhibited that venturing into equity funds exhibited a favorable
connection with financial performance. Bond investments and financial performance
displayed a feeble correlation. A slight and statistically insignificant affirmative correlation
surfaced between real estate investments and return on investment. Mutual fund
investments had a constructive and noteworthy influence on the financial performance of
investment firms. The interplay between the financial performance of Kenyan listed
investment entities and the composition of their portfolio was significantly shaped by
inflation. The study indicated that the financial performance of investment firms registered
on the Nairobi Securities Exchange was markedly influenced by the composition of their
portfolio. The inquiry unearthed a substantial correlation between returns on investment
and equity fund investments. Financial performance and investments in mutual funds
exhibited a modest but constructive correlation. Bond and real estate investments were
found to have no appreciable effect on the return on investment for listed investment
enterprises. To enhance their financial performance and more effectively mitigate their
firm's investment risk, the study recommended that investment company management
uphold a well-balanced portfolio of investments. In an endeavor to refine their financial
performance, investment firms should give heed to equity investments. This necessitated
investing in dependable counters with superior dividend payout and appreciation potential
Description
A Research Thesis Submitted to the School of Business, Economics, and Tourism in Partial Fulfilment for the Award of Degree in Masters of Science in Finance of Kenyatta University, November, 2024
Supervisors:
1.Moses Odhiambo Aluoch
2.Peter Ng’ang’a,