Determinants of investment intentions of individual retail stock market investors on the Nairobi Securities Exchange in Kenya

Abstract

The purpose of this thesis was to assess the determinants of investment intentions among the individual retail investors in Nairobi Securities Exchange. The specific objectives were; to investigate the influence of Perceived Investment Value on investment intention of individual retail investors in Kenya; to investigate the influence of expected sacrifices on investment intention of individual retail investors in Kenya; to investigate the influence of subjective investment knowledge on investment intention of individual retail investors in Kenya, to investigate the influence of compatibility on investment intention of individual retail investors in Kenya and to investigate the influence of expected perceived behavioral control on investment intention of individual retail investors in Kenya. In addition, the study sought to build a theoretical model to predict investment intentions in financial securities by individual investors by examining the relationships between subjective investment knowledge, expected sacrifice, Perceived Investment Value, compatibility, perceived behavioral control and investment intentions. The philosophical base of the research was realism while the research design was both explanatory and descriptive. A cross sectional survey, multi-stage sampling technique involving three hundred and eighty five randomly selected individual investors participated. A pilot test on a different sample gave a Cronbach‟s alpha greater than 0.8 for all the variables. Data analysis was by descriptive statistics and inferential statistics using Statistical Packages for Social Sciences (SPSS). Analysis of variance (ANOVA) was used to establish the level of statistical significance of difference between the observed and expected values. Regression analysis was used to estimate the model coefficients while Pearson coefficient of correlation was used to establish the strength of relationship among the variables, Test of hypothesis was also carried out. The results indicated that subjective investment knowledge, Perceived Investment Value, compatibility, perceived behavioral control had a positive and statistically significant effect on investment intentions of individual investors. The result further confirmed by the combined variables explains twenty eight point three percent of the investment intention of individual retain investors in Kenya. The effect of expected sacrifices on investment intention of individual investors was positive but statistically not significant. The limitations of the study included the fact that topic is quite sensitive and most of the respondents viewed such information as confidential. The respondents were assured that the information provided was to be used for academic purpose and would therefore be treated with confidentiality. The study recommends increased investor education to build self-assessed knowledge and investor confidence that will enhance their performance through improved judgement and help in transforming Kenya into a middle-income country with a vibrant financial services sector as envisaged by vison 2030. Additionally, to stimulate investments in financial securities, empowering individual investors with financial knowledge and demonstrating economical value would yield an increase in investments by individual investors. This is also in addition to ensuring that the investment option is compatible with the investor’s lifestyle and aligns well with their perceived behavior.