The Effectiveness of profit warnings in predicting decline in share prices in theNSE: an event study approach.

Date
2017
Authors
Wainaina, Martin Ngunu
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Profit warnings are issued by companies to inform shareholders that the current year’s profit will be significantly lower than the profit of the previous year or the anticipated profit for the current year (Jensen, 2005). The aim of this paper is to determine whether investors can rely on profit warnings as lead indicators of falling share prices. An event study is carried out to determine when the decline of share prices occurs with reference to issuance of profit warnings. A hypothesis test is then carried out to determine if the decline prior to the issuance of a profit warning is of material significance. The data used is of Kenya’s NSE, between the years 2002 and 2016.
Description
A Research project submitted in partial fulfillment of the requirements for the degree of Bachelor of Business Science in Actuarial Science at Strathmore University
Keywords
Nairobi Securities Exchange, Profit warning, Share prices, Event Study
Citation