Firm Characteristics, Inflation and Yield of Unit Trusts in Kenya
| dc.contributor.author | Akama Thaddeus Onyinkwa | |
| dc.date.accessioned | 2026-03-03T07:45:40Z | |
| dc.date.available | 2026-03-03T07:45:40Z | |
| dc.date.issued | 2025-11 | |
| dc.description | A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of the Degree of Doctor of Philosophy in Business Administration (Finance) of Kenyatta University. November 2025 Supervisors Ambrose Jagongo Fredrick W S Ndede | |
| dc.description.abstract | investors expect money market unit trusts to deliver above-market returns through professional fund management. However, persistent underperformance compared to benchmarks has eroded investor confidence in Kenya, raising concerns about management efficiency, cost structures, and institutional ownership models, while saddling investors with diminished portfolios and missed investment opportunities. This underperformance can be attributed to various factors, including inappropriate benchmarks, high operational costs, and conflicts of interest. This study examined how firm characteristics—institutional affiliation, benchmarks, and management fees—influence the yield of money market unit trusts in Kenya, with inflation as a moderating variable. The research was guided by a conceptual framework that posited relationships between these variables. The research was guided by Transaction Cost Theory, Deming Benchmark Theory, Cost-Plus Pricing Theory, Keynes’s Liquidity Preference Theory and Inflation Quantity Theory. The empirical review of existing literature informed the study's hypotheses and results interpretation. The study adopted an explanatory research design grounded in positivism philosophy, analyzing panel data from 2013 to 2022. From 19 money market unit trusts licensed by the Capital Markets Authority (CMA), 18 funds with complete data were purposively selected (96.6% coverage), generating 280 firm-year observations. Secondary data were obtained from CMA, Central Bank of Kenya, Kenya National Bureau of Statistics, and unit trust performance reports. Diagnostic tests included normality (Shapiro-Wilk), heteroscedasticity (Breusch-Pagan), multicollinearity (VIF), autocorrelation (Wooldridge), stationarity (Levin-Lin-Chu), and model specification (Hausman) tests. Random Effects panel regression models were employed. Ethical clearance was obtained from Kenyatta University and NACOSTI, ensuring data integrity and confidentiality. Results revealed independent funds yielded 1.6189 percentage points higher than bank-affiliated funds (p<0.001), while insurance-affiliated funds yielded 1.4958 percentage points higher (p=0.019). Bank deposit rates (β=1.29, p=0.009), 182-day Treasury Bills (β=1.00, p=0.001), and 364-day Treasury Bills (β=1.99, p=0.003) significantly positively affected yields. Management fees negatively impacted yields (β=-0.62, p=0.038). Inflation demonstrated direct positive effects (β=0.34, p=0.001) and significant moderating effects: Affiliation*Inflation (β=-0.07, p=0.015), Benchmarks*Inflation (β=0.14, p<0.001), Management Fee*Inflation (β=0.14, p<0.001). The moderation model's R² (8.02%) nearly doubled individual models' explanatory power (4.12%), confirming inflation's meaningful moderating role. The study concludes that institutional affiliation, benchmark choice, management fees, and inflation jointly determine unit trust performance. Recommendations include: CMA should regulate bank-fund conflicts of interest and implement fee transparency requirements; fund managers should optimize institutional structures, select appropriate benchmarks, reduce fees, and develop inflation-responsive strategies; investors should prioritize insurance-affiliated or independent funds, assess inflation-adjusted returns, and evaluate fee-performance relationships. Future research should extend analysis to equity/balanced/bond funds across East African markets, examine additional moderators (interest rate volatility, exchange rates, GDP growth), and employ alternative models (dynamic panel GMM, quantile regression, structural equation modeling) to enhance methodological rigor | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/32630 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Firm Characteristics, Inflation and Yield of Unit Trusts in Kenya | |
| dc.type | Thesis |