Determinants of Investment Perceptions of the Managers of Firms Listed at Nairobi Securities Exchange, Kenya

Abstract

This study was conducted with the general objective of examining the determinants of investment perceptions of Managers of firms listed at Nairobi securities exchange in Kenya for the period 1st January 2013 to 31st December 2017.The specific objectives were to establish the effect of cash flow on investment perceptions of managers of firms listed at Nairobi securities exchange in Kenya; To assess the effect of business risk on the investment perceptions of managers of firms listed at Nairobi securities exchange in Kenya ;To examine the effect of portfolio income on the investment perceptions of managers of firms listed at Nairobi securities exchange in Kenya and to determine the effect of financial leverage on the investment perception of the managers of firms listed at Nairobi securities exchange in Kenya The investment perception of the managers of the firms is a vital organ of the strategic plan of every business establishment. Success of new projects radically adds to the development, effectiveness and growth of the company. On the contrary, when a company project is unsuccessful, the company suffers reductions in efficiency threatening future existence. Companies faced with wrong investment perceptions of managers are placed under receivership; financial challenges; restructuring or delisted from Nairobi securities exchange altogether. This study intends to fill the gap by considering the possible investment perceptions of managers of listed companies that can affect the existence and growth of the listed firms. The study targeted 64firms listed at the NSE in Kenya. The sample size of 32 firms in the study formed 50% of the targeted population. This was in line with Mugenda and Mugenda (2003) who stated that a sample size of 50 % is sufficient and effective for data analysis. The study was based on primary and secondary data which was collected between2013 to 2017. The management executives from Operations, Finance and Accounts of the listed companies were requested to use the standard questionnaires for the 96 respondents in the study. Data was analysed using financial ratios, descriptive, correlation, standard deviation and means. Panel data updates were used to find out the impact of each of the variables in the study. The Random Effects Model (EGLS) criterion was used to describe the objectives of this study. Regression coefficients had a positive impact on cash flow, business risk, and financial leverage, while portfolio income had a positive but statistical impact on corporate investment visibility from the EGLS randomized approach. Finally, cash flow, business risk and financial leverage had null hypothesis rejected in favour of alternative hypothesis (financial leverage had a significant impact on financial perceptions). However, the null hypothesis of portfolio income was not rejected because it had significant impact on manager s financial perceptions. The study proposed that management of firms listed at the NSE in Kenya ought to have a good financial management system for effective investment management, that listed companies should ensure that a risk management strategy is developed to guide investment decisions, in order for Shareholders to increase wealth and their returns. The study had a number of limitations viz; the study was limited to only five variables relevant to the research; cash flow, business risk, portfolio income and financial leverage. It was limited to period of the study i.e. 2013 to 2017.Any period out of the study timelines was excluded from the study findings. The study findings were limited to the firms listed at the Nairobi securities exchange within Nairobi geographical period. Social, political and Economic factors also caused some of the limitations on the research findings. The study was also limited to the observations obtained from the identified senior managers of the firms. The study concluded that NSE and CMA managers should enforce collaboration between financial experts, analysts and investors to promote the process of making well informed investment perceptions of managers of the firms listed at the Nairobi securities exchange.