Macro-Economic Variables and Performance of Corporate Bonds at the Nairobi Securities Exchange, Kenya.
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Date
2018
Authors
Maina, Susan Nyambura
Kimutai, Gladys
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
This study sought to determine the Macro
economic variables and performance of
corporate bonds at the Nairobi Securities
Exchange in Kenya. The study was guided
by four specific objectives which were to
determine the effect of inflation, interest
rate, exchange rate and government
expenditure on the performance of corporate
bonds at the NSE in Kenya. The study was
guided by Efficient Market Hypothesis
Theory, Trade off Theory and Arbitrage
Pricing Theory. The study adopted a
quantitative research design that is a
longitudinal survey approach. The study was
done by means of a census approach. The
study focused on all the companies quoted
in the Nairobi Securities Exchange that had
issued corporate bonds in a fifteen years
period (2001 to 2015). Secondary data was
collected by means of a data collection form.
Analysis of the secondary data was through
descriptive procedures assisted by SPSS
Version 21 software. Moreover, a Pearson
correlation multiple linear regression
analysis were conducted to establish the
influence of each of the predictor variables
on the response variable. Data was presented
using graphical, pictorial representation,
tables as well as percentages to show the
degree of influence of macro-economic
variables on the performance of corporate
bonds. From the study, the Coefficient of
Determination, R Square indicated that
58.60% of the variation in performance of
corporate bonds was influenced by variation
in macro-economic variables namely
government expenditure, exchange rate,
inflation and interest rate. To that effect,
only 41.40% of the variation in performance
of corporate bonds was unexplained by the
factors that were included in the model.
Multiple linear regression analysis findings
demonstrated that inflation rates, exchange
rates and commercial banks interest rates
have a negative effect on performance of
corporate bonds. Government expenditure,
the regression output revealed, had a
significant positive influence on
performance of corporate bonds. Pearson
correlation analysis results demonstrated an
inverse relationship between three macroeconomic variables; exchange rates, interest
rates and inflation rates with performance of
corporate bonds. Government spending
showed a positive association with
performance of corporate bonds.
Recommendations were made for the
government to strengthen its regulatory
framework, majorly through monetary
policy, to keep the macro-economic factors
under check to reduce detrimental effects on
performance of corporate bonds.
Description
A research article published in International Academic Journal of Economics and Finance
Keywords
inflation rate, interest rate, exchange rate, government expenditure, performance, corporate bonds
Citation
Maina, S. N. & Kimutai, G. (2018). Macro-economic variables and performance of corporate bonds at the Nairobi Securities Exchange, Kenya. International Academic Journal of Economics and Finance, 3(2), 410-426