Effect of Return on Investment on Portfolio Diversification among Commercial Sugarcane Investors in Kenya

Abstract

The main purpose of this study was to establish the effect of return on investment on portfolio diversification among commercial sugarcane investors in Kenya.The study had four specific obejectives: evaluate the effect of return on capital employed on portfolio diversification among sugarcane investors in Kenya; assess the on return on equity on portfolio diversification among sugarcane investors in Kenya; examine the influence of return on assets on portfolio diversification among sugarcane investors in Kenya and to evaluate the influence of market performance measures on portfolio diversification among sugarcane investors in Kenya. Descriptive correlation was then used to describe and establish the relationships among the study variables. The target population for this study comprised of all sugarcane investors around Kakamega and Bungoma Counties. Both primary and secondary data was used in this study and the positivistic approach to research guided data analysis was also used. Primary data was collected through the use self-administered questionnaire. Secondary data on the other hand, was used to obtain information from already existing literature.The study used multi stage sampling in selecting the invsetors to be interviewed. After the data has been collected. The data was analyzed by simple descriptive analysis using statistical package for social scientists (SPSS) to generate cumulative frequencies and percentages.The study collected data from a sample of 312 out of 399 respondents. The study revealed a positive and statistically significant correlation between Return on Investment and portfolio diversification. Several measures were used to establish this relationship. These include ROCE, ROE, ROA; Fixed and Current and market performance measures. All the measures indicated a positive relationship with portfolio diversification independently.In general the study revealed a positive and statistically significant relationship between Return on investment and portfolio diversification. The study was limited in coverage to only two counties and therefore recommends that a similar study be carried in other counties to enhance the generalisability of the findings.