Mergers and Financial Performance of Non-Financial Institutions Listed at the Nairobi Securities Exchange, Kenya
Loading...
Date
2021
Authors
Keitany, Rebecca Jeruto
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Merger has been undergoing in organizations in Kenya with the main focus on financial
performance improvement. However, most of these organizations have never realized their
financial targets. The 2019 Central Bank of Kenya report shows that 25% of the non financial
institutions reported losses in the 2018/2019 financial year. This was an increase over the
preceding five years where not more than 20% of the non financial institutions had reported
losses Therefore, this study sought to establish how non-financial institutions financial
performance in listed at the Nairobi Securities Exchange in Kenya is affected by mergers. The
specific focus of the study was to examine the effect of liquidity, market prospect and leverage
on financial performance. The study was anchored by financial synergy theory, information and
signalling theory and synergy gain theory. An exploratory research was used. Three nonfinancial
institutions namely: Car and General (C&G) and Cummins, Unga group Holdings and
Kenolkobil were targeted. The study used secondary data collection sheet which involved the
documentary reviews of data available in the released financial statements, and annual reports for
the last 10 years, that is, 2011 to 2020. Analysis of quantitative data was through the use of
descriptive statistics that included mean and standard deviation. In addition, determination of
how variables relate to each other was done using inferential statistics specifically using analysis
of multiple regressions. The study established that liquidity, leverage and market prospect had a
positive significant effect on financial performance. The study concludes that due to insufficient
market depth or market interruptions, non-financial institutions were unable to efficiently
liquidate or offset a particular position at or near the last traded market price, leading them to
participate in bank lending to satisfy their daily transactions. A smaller number of the nonfinancial
institutions are at risk of losses due to changes in book value per share, price-earningratio
and earnings per share and maybe other indicators whose values are set in the market.
Leverage is likely caused by the total company debt and shareholder equity. Leverage enables
organizations to magnify their shareholders’ profits because if an organization is solely financed
by shareholder equity, then its profitability to the shareholders will change in proportion to its
own change in profitability. The study recommends that the non-financial institutions listed at
NSE should aim at maximizing their overhead expenses that consume much of their cash flow.
The non-financial institutions listed at NSE should aim at gaining forecasted ability to compete
in a marketplace by comparing publicly traded companies’ stock prices with other financial
measures such as earnings and dividend rates. The non-financial institutions listed at NSE should
increase financial leverage by borrowing capital through issuing fixed-income securities or by
borrowing money directly from a lender.
Description
A Research Project Submitted in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Business Administration (Finance Option) of Kenyatta University, November, 2021
Keywords
Mergers, Financial Performance, Non-Financial Institutions, Listed, Nairobi Securities Exchange, Kenya