MCOM Theses and Dissertations (2019)

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Analysis of factors affecting adoption of agency banking among micro, small and medium sized enterprises in Nairobi County - a case study of Gikomba Market
(Strathmore University, 2019) Mukhule, Joyce Emmah Nabwire
Agency banking as a comparatively new model in Kenya has attracted attention from researchers due of the contribution it has towards financial inclusion. Lack of adequate finances has been identified as one of the challenges faced by MSMEs. Agency banking as an innovation seeks to mitigate the aspect of financial inclusion by taking banking services, which include but are not limited to provision of finance close to the customer. However, it is not conclusive as to what factors influence adoption of agency banking among potential customers. This led to the need to analyse possible factors that would affect adoption of agency banking. The first objective set out to analyse how perception influences adoption of agency banking whereas the second objective looked at social influence as a factor affecting adoption of agency banking. The research was descriptive targeting micro, small and medium enterprises in Nairobi County with special focus on Gikomba Market. Stratified Random Sampling was used and a structured questionnaire applied in data collection. The research findings concluded that social influence and perceived usefulness had a positive and significant impact on adoption of agency banking. The study recommends that there is need to have public participation through informative sessions as well as aggressive advertising and revamping of the agency model as a whole.
Assessing the efficacy of price regulation on fuel pump prices in Kenya
(Strathmore University, 2019-06) Miswa, Beryl Anyango
The government through the Energy Regulatory Commission (ERC) sets the fuel price using a formula that takes into consideration the importation cost of crude or refined product, freight, local transportation costs, insurance, refinery processing fees (for crude oil), taxes and a profit margin. Oil Marketing Companies (OMCs) have been critical of the ERC’s pricing formula since it does not cover financing costs and the rising cost of doing business due to inflationary pressures. Margins in the sector are also negatively impacted by low margins and high finance costs due to the capital- intensive nature of the business. This study aimed to examine the efficacy of price regulation on the pricing of fuel in Kenya. It sought to assess the appropriateness of components of the pricing formulae, determine the various perspectives of the oil marketers in relation to the pricing of fuel, and examine the success and challenges of the pricing formulae/regulation. The study used descriptive research design, secondary data from the websites of ERC and the oil marketers and conducted in depth interview with top 7 OMC managers. The scope of the study was the ERC and the top seven OMCs based on their market share in Kenya. The findings of the study showed that; the introduction of oil price controls in Kenya had greatly affected the pump prices; the pricing regulation was not beneficial to OMC’s and the changes in oil prices due to the pricing formulae had led to increased and uncontrolled economic fluctuations. The study recommended that since the demurrage costs tend to be significant due to clearance delays experienced and the operations should be closely monitored to avoid such unnecessary delays and increased costs. The ERC should still consider changes in international crude oil prices and the changes in the US dollar Kenya shilling exchange rate in setting maximum oil retail prices for the four products. The study recommends a structure that establishes a clear link between retail prices and import prices based on import costs, distribution margins, demurrage costs, landed costs and tax levels.
Assessment of employee productivity as a determinant of stock performance of Kenyan listed companies offering Employee Share Ownership Plans
(Strathmore University, 2019) Kiura, Kenneth Kinyua
The study sought to assess whether Employee Productivity is a determinant of stock performance of Kenyan listed companies offering employee share ownership plans. The premise of the study is that, to be economically viable, an ESOP should be able to, through enhanced employee involvement and satisfaction and morale boosting to improve productivity. This should in turn lead to improved firm performance and thus benefitting both shareholders and employee owners by increasing their holdings value. This study used stock performance to avoid results that could be occasioned by manipulation of financial data. It employed a mixed research design that included both descriptive and quantitative research designs and purposive sampling was used to pick nine listed companies with approved ESOPs and another nine companies without ESOPs, which acted as the control sample. Secondary data was obtained from the financial reports of the firms for the study period as well as the stock market and was used in running the regression model. The key variable tested was employee productivity while the moderating variable was the presence or absence of ESOPs and several controlling variables were added to the model to improve its predictability. A t-test was used to check whether there is a significant difference in stock performance between companies with ESOPs and those without ESOPs listed at the NSE. The results showed that there is no significant difference between the stock performance of companies offering ESOPS and those not offering ESOPs listed at the NSE. Panel data was used to examine the effect of employee productivity in the presence of moderating variable (ESOP) on stock performance of companies offering ESOPs at the NSE. To begin with, presence or absence of ESOP was added as a moderating variable to see if Employee Productivity in the midst of ESOP was a significant determinant of Stock performance of companies listed in the NSE. Secondly, to further investigate the effect of employee productivity on stock performance, control variables were added to the model to see how all the variables interact together to explain stock performance of listed companies with ESOPS at the NSE. A pooled OLS was adopted and a stepwise regression carried out to check the significance of the key variable alone and in the presence of the moderating variable and control variables. At 5% significance, the only significant variable was found to be Ln Profits. Although this was the only variable found to be statistically significant, the overall model was found not to be significant in that the key study variable in the model, Employee Productivity and the moderating variable, ESOP, were not significant Primary data was collected using questionnaires both for the management and the employees to supplement the results from the secondary data regression analysis. To check whether management satisfaction with employee productivity is stimulated by the adoption of ESOPs, a t-test was used to check the mean difference and from the results, it appears that the means of the management satisfaction between firms with ESOPs and those without ESOPs listed at the NSE are not statistically significantly different. The study also sought to find out whether employee satisfaction is stimulated by adoption of ESOPs and a t-test was used to check the mean difference and from the results, it appears that the means of the employee satisfaction between firms with ESOPs and those without ESOPs listed at the NSE are statistically significantly different. This now elucidates that although the questionnaire findings had both shown that employees were generally satisfied both in companies with and without ESOPs, the employees in firms with ESOP seem to enjoy significantly more satisfaction.
Assessment of factors affecting residential real estate prices in Nairobi County
(Strathmore University, 2019) Ungayi, Hellen Musumba
The study analyzes the effect of selected economic factors on real estate market in Kenya. House prices in Kenya have continued to rise over the past years. The study employed both cross sectional and time series data analysis to establish the relationship between growth in house prices in real estate and selected economic variables. Physical attributes of the property, locational factors and proximity to social amenities are fundamental in the determination of house prices. A factor analysis on cross sectional data showed that number of rooms, number of bathrooms, backup generator, swimming pool, balcony, parking garage and lift (micro variables) had significant effect on house prices at 5% level of significance. This is important for real estate developers when designing and building houses to capture home owners’ preferences that can add value and catalyze the residential real estate sector. Macro analysis of time series data using Vector Error Correction Model (VECM) revealed that on one hand inflation rate, Hass price index, investments in real estate and GDP while forex and diaspora remittances on the hand have asymmetric long run effects on growth in house prices on average, ceteris paribus. This implies that economic growth and conducive investment environment in the country stimulates developments in real estate which in turns leads to a steady supply of housing units at affordable prices for potential home owners. Lack of centralized housing data posed a challenge in collecting and collating time series data was one of the limitations faced by the researcher where it necessitated the researchers own calculation. This research will be of value as it gives insights on what matters most to different income groups as opposed to generalized findings.
An Assessment of select market timing strategies’ performance in Nairobi Securities Exchange
(Strathmore University, 2019) Ng’ang’a, Judah
Herding behavior among Kenyan traders in the capital markets has been majorly attributed to low levels of income and lack of knowledge in trading principles. This focus of this study was on the latter challenge. The study is meant to benefit market traders in determining optimal entry and exit points in equity markets. The study evaluated the performance of three market timing strategies namely the relative strength index (RSI), simple moving averages (SMA) and hidden Markov model (HMM). The data considered in this study included the share price of the NSE-20 index over the period 2004-2018 triangulated to the perceptions and opinions of trading experts in Kenyan fund manager firms. The performance of market-timing strategies in this study was determined by a strategy’s average annual returns, Sharpe ratio as well as a market timing ability. Using Henrikson and Merton market timing model, this study shows that all the market timing strategies have positive market timing strategies, with HMM having the best market timing ability. By accommodating the autoregressive nature of financial prices this study examined the ability of the strategies to time the market using an autoregressive distributed lag (ARDL) model. The model shows that all the strategies lack the ability to time the market but just like in Henrikson and Merton model, HMM performances ranks best among the three strategies. Over the period 2004-2018 the Sharpe ratio of all the market timing strategies exceed that of SBH. The same is observed when simulated data is used instead of the observed data, on individual stocks as well as in a portfolio setting. When all the tests are considered the performance of HMM strategy ranks first followed by SMA, RSI while SBH was determined to be the least profitable trading strategy. In Kenya, this study found that investors are averse to market timing strategies and tend to herd towards buy and hold strategy. Given the low profitability of the SBH strategy in NSE, this study recommends the use of HMM as trading strategy to determine entry and exit points.
Assessment of the implementation of anti-money laundering policy: perspectives of corporate bank clients’ in Kenya
(Strathmore University, 2019-06) Abdikadir, Farah Faiza
Benefits of crime have been on the rise through the use of legitimization of a number of transactions by money launderers. To combat money-laundering activities, commercial banks have been given a greater role by Anti- Money Laundering legislations. Clients’ have to be screened for money laundering for them to be allowed to open accounts or transact. Most of the interaction between the bank and the clients’ from the onboarding stage are therefore guided by the Anti-Money Laundering policies. This study therefore sought to assess the implementation of the anti-money laundering in relation to corporate client perspectives within the commercial banks in Nairobi. The study was guided by three objectives which were: To establish the effects of corporate clients’ identification procedures on corporate client perspectives in commercial banks in Nairobi county; To examine the effects of corporate clients’ acceptance policy implementation on corporate clients’’ perspectives among commercial banks in Nairobi county; To determine the effects of transaction monitoring policy implementation on corporate clients’’ perspectives among commercial banks in Nairobi county. The study utilized cross sectional design. Data was collected from corporate clients’ of 20 randomly selected banks out the 42 banks in Nairobi. The study used stratified random sampling technique to select a sample of respondents from the bank clients’. The study used primary data, which was quantitative in nature. The primary data was collected using structured closed-ended questionnaires. After data collection, the filled-in and returned questionnaires were edited for completeness, coded and analyzed using Statistical Package for Social Sciences. The results showed that all the factors, which were corporate client identification, corporate client acceptance and transaction monitoring, were statistically significant in explaining corporate client perspectives among corporate clients’ in Nairobi County. Findings of the study may serve as a stepping-stone to researchers to conduct further studies on the same or similar topics. The investment regulators in the country such as the Capital Markets Authority (CMA), Kenya Banker Association (KBA) and Central bank of Kenya may use these study findings to understand the bottom-line impact of bank Anti-Money Laundering regulatory requirements on positive corporate client perspectives. Commercial banks will benefit from the findings and recommendations made by the study as they aim at bettering their client’s experience and general outlook. This study was only limited to Nairobi County. Similar studies should be made in other counties and jurisdictions and the findings compared to those of this study.
The Determinants and extent of whistleblowing policy disclosures of companies listed on the Nairobi Securities Exchange
(Strathmore University, 2019) Muchemi, Mary
The purpose of this study was to investigate the determinants and extent of whistleblowing policy disclosures of companies that are listed on the Nairobi Securities Exchange (NSE). A disclosure index was developed and used to quantify the extent of disclosures. The association between whistleblowing policy disclosures and determinants related to the firm’s characteristics, its legal environment, the ethical environment as well as corporate governance characteristics were also investigated. The study utilized the legitimacy and institutional theories (coercive isomorphism) to evaluate the extent of disclosures. The study measured the extent of disclosures of whistleblowing policies in the annual reports of NSE listed companies and the moderating effect of implementation of the Code of Corporate Governance Practices for Issuers of Securities to the Public 2015 (Code) using a disclosure index. Based on a review of the NSE listed company websites and annual reports, the study found that there is a low whistleblowing policy disclosure. Most key determinants had a positive association with the scope or extent of whistleblowing policy disclosures with firm size being the exception as it was found to be negatively correlated in this study. The study also found that the implementation of the 2015 Code led to an increase in the extent of whistleblowing policy disclosures and adds weight to the theory that companies will legitimate their activities by increasing their disclosures in a shifting regulatory policy context.
Determinants of corporate sustainability disclosure among large firms in Kenya
(Strathmore University, 2019-06) Njoroge, Brian Kamau
The objective of the study is to assess the determinants of corporate sustainability disclosure among large firms in Kenya. Specific objectives are; to determine the level of corporate sustainability disclosure among large firms in Kenya, to determine the effect of strategic posture on corporate sustainability disclosure among large firms in Kenya, to determine the effect of firm attributes on corporate sustainability disclosure among large firms in Kenya, and to determine the effect of stakeholder attributes on corporate sustainability disclosure among large firms in Kenya. A descriptive research design was employed so as to accomplish the study objectives by finding out if the independent variables determine the level of corporate sustainability disclosure among large Kenyan firms. The study’s target population comprised Kenyan firms listed by the Kenya Revenue Authority (KRA) in its large tax payers category. The KRA large taxpayers list is used as a basis for definition of large firms in Kenya. The study collected primary data to meet the research objectives. Primary data was collected using a questionnaire. Data analysis was carried out on the collected quantitative data using descriptive and inferential statistics. Pearson R correlation was used to measure strength and the direction of linear relationship between variables. Multiple regression model was fitted to the data in order to test the effect of the independent variables on the dependent variable. Diagnostic tests were also considered to test the model for linearity, heteroscedasticity, multicollinearity, and normality. Strategic posture, firm attributes, and stakeholder attributes determine corporate sustainability disclosure among large firms in Kenyan. Results of the study revealed positive and significant effect of strategic posture, firm attributes, stakeholder attributes on corporate sustainability disclosure. This implies that there is need for large firms to improve on their levels of governance disclosure in comparison with environmental disclosure. Large firms ought to strategize measures geared towards strategic position, internal and organization culture should be geared on disclosing information which would aid minimizing cost of accessing required information. Thirdly, there is need for coherent communication amongst stakeholders to eliminate pressures which may jeopardize quality of information shared publicly.
Determinants of financial distress in Kenyan Commercial Banks
(Strathmore University, 2019) Ndungu, Roseanne Wanjiru
The recent relapse of bank failures in Kenya has been a cause for concern especially after a period of several years of stability in the banking sector. Past studies have identified key determinants of financial distress but few studies have established the effect of spreads on financial distress. This study therefore sought to establish the determinants of financial distress in Kenyan commercial banks. Specifically, the study looked at the influence of leverage, overly aggressive activity, insider lending, ownership structure, bank size and financial soundness (capital adequacy, asset quality, management efficiency, earnings, liquidity and market risk) as bank specific factors. It also looked at economic growth, the central bank rate and interbank activity as macro-economic factors. The study adopted a post positivistic philosophy and a quantitative research design. The methodology employed was panel data. A multivariate regression model was used to test the hypotheses and link the variables. The study took on a census approach and all forty-three Kenyan commercial banks were taken as the population. Secondary data was extracted from the financial statements of all commercial banks and Central Bank of Kenya website for the period 2012-2018. The study found that leverage, overly aggressive activity, market risk and bank size negatively and significantly affected the level of financial distress. Earnings, liquidity and the spread on insider lending are found to positively and significantly affect financial distress. Private ownership was associated with higher degrees of financial distress. Lastly, macro-economic factors were found to be poor indicators of the level of financial distress explaining less than two percent of the variation in financial distress levels. The study recommends that financial ratio analysis be complemented with additional evaluations, with extra features such as competitive position, capital structure, and regulatory compliance among others being encompassed within the final evaluation.
Determinants of interest rate spreads among licensed commercial banks in Kenya
(Strathmore University, 2019) Koech, Emmanuel
High interest rate spreads remain a barrier to financial intermediation because it disheartens probable investors with little profits on deposits and raises funding expenses for debtors consequently decreasing savings and development chances. Thus, it is imperative to ascertain factors that affect interest rate spreads that in essence to solve the barriers to financial intermediation. The broad research objective was to establish factors that influence interest rate spreads. Specific objectives included to determine effect of interest capping legislation, asset quality, management quality, bank size, and leverage on interest tariff spreads of commercial banks in Kenya. An exploratory, ex post facto and causal research design was adopted because it established the cause and effect relationship. The target population was the 42 licensed commercial banks in Kenya as at 30th June 2016. However, eight banks were expunged from the analysis because they became licensed before the study period, ceased operations in the study period, or were sharia compliant banks that did not charge interest. The study period comprised five quarters before interest capping law was enacted and five quarters after. The study utilized secondary panel data. The researcher employed multiple linear regression to analyze data collected during the study, Statistical Package for Social Sciences (SPSS) was used in analyzing data. Research variables were analyzed using fixed effects panel regression model. The univariate general linear model was utilized with the banks being the limiting factor. The study concluded that the factors chosen in the study have substantial effect in unison on interest tariff spread. However, only the interest rate capping legislation had a noteworthy effect on interest rate spread in isolation. This implies that since the enactment of bill capping interest rates, the interest rate spreads have been declining. Thus, the law had a significant influence on interest rate spreads since its enactment. Research findings were proposed to government agencies to evaluate influence of interest tariff capping law on interest rate spreads since its enactment and to also consider the effect on it by the various factors when formulating policies and legislative frameworks. Commercial banks’ management, consultants, and scholars can also utilize research findings to document influence of the various factors on interest tariff spreads.
Determinants of quality of assurance on sustainability reports in Sub-Saharan Africa: case of listed companies in Kenya, Nigeria, and Botswana
(Strathmore University, 2019) Gatakaa, Christine Njeri
In recent times, it is evident that consumer and investor needs are constantly evolving, so has the facts stakeholders consider essential for decision-making. Conventionally, financial data was essential in making decisions but presently, it is not adequate for company analysis and valuation thus, the rise in demand for non-financial (social and environmental) which is relevant in evaluation of risks and opportunities. The major drivers being investor pressure, regulation and stock exchange requirements. In response to this kind of pressure, companies seek assurance services for additional credibility and validity on the information included in their sustainability reports. Thus, this research wanted to ascertain the quality of assurance on SRs and to understand what the determinants of quality are. The study also sought the perspective of industry players on the barriers of quality assurance. Using a sample of 34 companies, 18 companies in Kenya, 9 in Nigeria, and 7 in Botswana for the period 2013 to 2017, the study findings indicate that the quality of assurance is relatively low in Sub-Saharan Africa. An evaluative framework was used to measure quality of assurance and Botswana ranked highest followed by Kenya and Nigeria. Industry sector and company profitability were the two significant variables determining the quality of assurance. From the primary data, independence of assurer, profession of assurer and the assurance engagement lead in determinants of quality of assurance on sustainability reporting. The overall findings indicate that there is a need for proper guidelines for sustainability reporting essentially improving on the quality of assurance as the assurance process can be comparable and take into consideration the material aspects in SR.
Determinants of subscription levels during Initial Public Offferings (IPO’s) of East African listed firms
(Strathmore University, 2019-06) Aluvaala, Sharon Iposhe
An initial public offer enables a firm to transit from private ownership to public ownership. This was a cross sectional study of the factors that influence the uptake of IPOs in the East African region comprising of Kenya, Tanzania, Uganda and Rwanda on their respective Securities Exchanges. The study sought to establish what factors determine subscription levels during Initial Public Offerings (IPOs) of firms in the East African region. This study used descriptive research design and multiple regression analysis to determine key determinants of the level of subscription during IPOs. The period of the study was between 1990 and 2018 with a sample 47 firms, with 34 firms having their IPOs oversubscribed, 11 firms reported an under subscription while 2 firms attained a full subscription. To corroborate the results, questionnaire data obtained the transactional advisors perspective on the same. The factors that were considered for this study were: offer price, par value, post issue promoter holding, past performance, age of the firm, length of offer period and investor participation. The study found that offer price, past performance and investor participation were statistically significant hence they were significant determinants of the subscription levels. However, par value, post issue promoter holding, age of the firm and the length of offer period were not statistically significant therefore they did not influence subscription levels. The study further made a distinction between Privatized Initial Public Offerings (PIPOs) and private Initial Public Offerings. PIPOs are firms where the government is offloading its share ownership to the general public while private IPOs are fully private firms that are going public. A comparative analysis was then made to establish whether investors prefer state owned firms or private firms. The findings revealed that there was no statistically significant difference on the subscription levels between an offer for sale by the Government and a private offer. Since the study relied extensively on information provided by prospectuses and disclosures in audited financial statements, a further study on other qualitative factors on what determines subscription levels may be necessary. Future studies can also focus on the specific company factors and behavioral factors investors consider that result to varying subscriptions levels as reported by various firms despite the market being the same and further determine whether these are the factors that influence the issuance of IPOs.
Determining the factors impacting the cost of compliance with Know Your Customer requirements in commercial banks
(Strathmore University, 2019) Dzanga, Caroline Kavumbi
KYC compliance is no longer a suggestion for best practice but has instead become mandatory with regards to compliance for commercial banks in Kenya under POCAMLA 2009. Having an effective KYC requirement is a challenge to many commercial banks as the KYC guideline issued by the CBK appeared to be applied inconsistently depending on factors specific to the various commercial banks. In this regard, it has been noticed that commercial banks give an atmosphere desirable to the flow of that cash. This has turned the financial system into the key area in which illegal money is first introduced within the financial system for the anti-money laundering initiative. The overall aim of this study was to assess the impact on commercial banks ' compliance costs of knowing your client's requirements. This study was based on the basic theories of deterrence theory and cost of service theory. The study will employ descriptive research design. Both secondary and primary data were used in the analysis. The study targeted all the 43 commercial banks in Kenya. The study period was 2011 to 2017. The sample size was 80 respondents who were selected using simple random sampling. The study found that KYC requirements have a positive and significant influence on cost of compliance in the Kenyan commercial banks. The implication of the results is that effort by the banks to comply with the KYC policy is likely to be accompanied with increased cost of compliance. These costs could be attributed to number of awareness campaigns that banks organize, number of staff trainings held annually, number of staff in charge of IT systems, number of monitoring staff and number of fines and penalties accrued to the banks. Further, the study established that size of the banks measured in terms of total assets does not moderate the relationship between KYC and cost of compliance. All the control variables except profitability were found to have a positive (asset quality and ownership) and negative (bank age) significant influence on cots of compliance. Based on the findings, the study recommended that banks should come up with cost effective customer awareness strategies to ensure that they cut down on costs, should develop effective training programs, which will lead to cost reduction, should be able to source for highly competent IT experts to be in charge of the systems and should find ways of reducing the number of monitoring staff as a way of cutting cost.
The Effect of capital structure and agency costs on the firm value of non-financial companies listed on the Nairobi's Securities Exchange
(Strathmore University, 2019) Kisilu, Gloria Mwende
The value of a firm is an important indication of the financial performance of any company, more so to current and potential investors. Firm value is affected by various factors, this study singles out three factors as the independent variables; leverage, cost of capital and agency costs, as to what extent these factors affect firm value. The study population was of 46 non-financial listed companies in Kenya; only 22 companies are on focus in the study as they met the criteria of a balanced panel data approach. A sectoral approach is taken in the study, as the 22 companies are analyzed in their various sector category for a 5-year period (20 13-20 17). The regression results showed that all the independent variables, including the moderating variable of size were highly significant to firm value with a p value of 0.00 each. Leverage and cost of capital resulted in positive significance while agency cost and size resulted in negative significance. The results derived from the answered questionnaires were consistent with the regression results. The study measured firm value using Tobin's Q ratio, the overall mean aggregate of all the companies being 1.12 and indication that investing in non-financial companies in the NSE is a good investment prospect. The aggregate value of each company in the eight sectors is given. The firm value was computed based on information derived from the company's statements and to act as a guide but should not be used in isolation when making investment decisions.
Effect of cross listing on stock liquidity in East Africa security exchanges
(Strathmore University, 2019-05) Maina, Purity
Despite the huge importance of stock liquidity of listed firms, little is known on whether cross listing has an effect on stock liquidity for all cross listed firms in East Africa. This research study aimed at determining the effect of cross-listing on stock liquidity of cross-listed firms in East Africa and further the effect on the relationship between liquidity drivers and stock liquidity. The perception of management of listed firm’s on cross-listing was also assessed. The study used both primary and secondary sources of data. The secondary data were collected from the share pricelists for nine cross-listed firms in East Africa. The primary data were obtained through issue of questionnaires to thirty five finance managers and CFOs of East Africa listed firms to assess their perception of factors that motivate and hinder cross-listings as well as effect of cross-listing on liquidity. Random effects panel regression and test of equality of means were used to analyze the secondary data whereas the primary data was analyzed using descriptive statistics and triangulated to secondary data findings. The regression model output indicated that no significant relationship exists between cross-listing and stock liquidity as measured by bid-ask spread in the short run and long run. Further, the analysis on individual cross-listing events indicated that majority of the cross-listings did not yield significant improvements in stock liquidity both in the short run and long run. Management of listed firms perceive that most cross-listings in East Africa are majorly motivated by need to signal better future prospects to investors and to exploit growth opportunities. Investors who are interested in stock liquidity are encouraged to look at whether other strategies including rights issue and stock splits improve stock liquidity of East Africa firms since investing in cross-listed firms may not be quite beneficial. Researchers and scholars are encouraged to research on whether strategies such as rights issue and stock splits improve stock liquidity. One limitation of this study was that it focused on East Africa which comprises of frontier markets and hence the results cannot be conclusively generalized to the emerging and developed markets. Future researchers can explore the emerging and developed markets and find out if the findings will be similar. The study contributes to knowledge through analyzing the market width aspect of liquidity and comparing the effect of cross-listing in the different East Africa markets since they are developed differently.
The Effect of local content policies on sustainable local development by upstream oil and gas companies in Kenya
(Strathmore University, 2019) Mulati, Julius Wachiya
Despite the massive surge of multinational companies into the African extractive sector, regions where extractive activities are occurring have remained steeped in poverty and underdevelopment. In response, developing countries have come up with local content requirements, legislations, or regulations to promote equitable distribution of natural resource wealth, there has been a movement towards introducing policies to leverage the resource, promote industrialization, and sustain economic growth. On the contrary, the effectiveness of local content in driving sustainable local development remains unclear. The general objective was to investigate the effect of local content policies on sustainable local development in the upstream oil and gas industry in Kenya. The study sought to determine the effects of employment and training of local workforce, domestic sourcing of goods and services and the effect of technology transfers to local economy on sustainable local development by the upstream oil and gas companies in Kenya. The study was grounded on the stakeholder theory and adopted a descriptive research design. The sample consisted of permanent employees from upstream oil and gas companies in Kenya. Purposive sampling was used to generate a sample size of 77 employees to whom a standardized closed-ended 5-likest scale questionnaire was administered. The data was analyzed using SPSS for both descriptive analysis and inferential computations. Descriptive statistics included frequencies, percentages, means and standard deviations, while the inferential statistical measures were Pearson correlations and linear regressions. The results were presented in tables, charts, and graphs. The results indicate that there is a positive and significant association between the independent and dependent variable. The study found out that local employment, training of local workforce, and domestic sourcing of goods have a positive effect on sustainable local development, but the effect was not statistically significant. Technology transfers had a positive and significant effect on sustainable local development. The study concludes that companies have moderately initiated, adopted, and implemented provisions of local content policies, and that these policies have the potential of improving sustainable local development. The study recommends the development of a clear policy framework on local employment as part of local content policies. Upstream oil and gas companies should expand the provision of internship opportunities as well as staff learning through cross-posting. There is need for upstream segment to increase opportunities for domestic firms. Finally, upstream companies to develop and adopt technology transfer agreements, form joint ventures, and set aside funding support for local research and development.
The Effect of social, cultural and economic capital on financial performance of Kenyan commercial banks
(Strathmore University, 2019) Wachira, Solomon Mwihungi
The importance of banks in any economy cannot be underestimated as they act as the intermediaries between lenders and borrowers to ensure cash flows within the economy. It is therefore important for bank regulators worldwide to ensure that bank financial performance is positive so as to avoid bank runs that may cause systemic bank failures that may in turn lead to recessions or depressions. The Basel Accords were introduced in the early 1980s to ensure positive bank condition that would in turn translate to positive financial performance. However, even with the revision in 1991 and later in 1999 for Basel II, there have still been bank failures. The most recent widespread failures led to the global recession of 2008 which was occasioned by failures of banks that were classified as financially sound and whose financial performance was stable, for example, Lehmann Brothers in the United States of America. In response to the failure of “sound” banks, the Basel Committee revised their capital requirements in an attempt to ensure better risk regulation in banks. However, this measure only focused on financial capital while bank failures have been attributed to other factors other than the financial capital, for example, moral hazard by managers which leads to losses or poor governance which leads to huge non-performing loans. This observation from previous literature influenced this study through the introduction of social capital and cultural capital, which when combined with financial capital, form the Bourdieusian Theory. This theory explains that these three forms of capital influence organizations’ performance significantly and the relationship has been shown by previous studies. This study tested if social capital, cultural capital and financial capital have an effect on the financial performance of Kenyan commercial banks. This is done by using quantitative proxies identified by previous researchers and qualitative measures from the Integrated Reporting (IR) Framework, introduced by the International Integrated Reporting Council (IIRC). The quantitative proxies were used in the model to show the effect, if any, that social, cultural and financial capital had on financial performance. The framework introduced more dimensions of capital that influence companies namely; manufactured, intellectual, human, natural, and social and relationship in addition to the traditional financial capital. The paper established proxies to be used in the model for social, cultural and financial capital to compare to the financial performance. Qualitative measures were established to measure bank management’s perceptions on the importance of social and cultural capital. Data was collected from Kenyan banks that were in operation in 2016 and analyzed. The quantitative data collected showed that there existed a relationship between the three forms of capital, social, cultural and economic and the model used was significant. The perception of managers, measured using data collected using a questionnaire was also presented. It was found that most responses were moderate thus supporting the quantitative findings that social and cultural capital have an effect on bank performance and therefore regulators may consider incorporating them as measures affecting bank performance. The findings will build the pool of knowledge on Bourdieusian theory and its effect on the financial performance of banks in Kenya.
Effect of tax reforms on voluntary tax compliance among small and medium enterprises in Kenya: a case of Nairobi County
(Strathmore University, 2019) Musyoka, Nelly Ngina
Despite the crucial role played by SMEs in raising tax revenues and the tremendous growth experienced in this sector, the tax gap within this sector is still very high reaching about 33.1% to 35%. This has been attributed to among other factors low voluntary compliance levels. To deal with this trend, the government has over the years instituted various tax reforms. Nevertheless, the impact of these tax reforms on voluntary compliance levels is mixed and hence, this study sought to clarify these findings. The aim of the study therefore, was to assess the effect of tax reforms on voluntary tax compliance among SMEs in Nairobi County, Kenya. The study sought to establish the effect of technological tax reforms on the voluntary tax compliance among small and medium enterprises in Nairobi County, Kenya; to determine the effect of administrative tax reforms on the voluntary tax compliance among small and medium enterprises in Nairobi County, Kenya; to examine the effect of tax payer education reforms on the voluntary tax compliance among small and medium enterprises in Nairobi County, Kenya; to find out the effect of tax policy reforms on the voluntary tax compliance among small and medium enterprises in Nairobi County, Kenya and to establish the joint effect of tax reforms on the voluntary tax compliance among small and medium enterprises in Nairobi County, Kenya. The study covered the reforms undertaken for the period 2008 to 2018. The study was guided by the economic deterrence theory, the Allingham and Sandmo theory and the fiscal psychology models. The study applied a mixed methods research design. The study targeted all the 8983 licensed SMEs within the Nairobi CBD and 27 KRA officials handling tax issues within the Nairobi CBD region. In selecting the sample, simple random sampling and purposive sampling were used. Primary data using semi-structured questionnaires and structured interview guides was collected. The data analysis was undertaken using qualitative and quantitative approaches. A multiple linear regression model was used to show the link between tax reforms and tax compliance among SMEs in Nairobi County. The study findings showed that all the tax reforms had a positive and significant isolated or individual effect on voluntary tax compliance among businesses under study. Results on the combined effect of tax reforms on voluntary tax compliance among these businesses revealed that technological tax reforms, administrative tax reforms, taxpayer education reforms and tax policy reforms had a joint positive and significant effect on voluntary tax compliance among SMEs in Nairobi County. The study therefore concluded that implementation of effective tax reforms simultaneously was likely to improve the level of voluntary tax compliance among SMEs. Several recommendations were made in line with the findings obtained.
Effect of treasury management on the financial performance of Commercial Banks in Kenya
(Strathmore University, 2019-06) Gatimu, Teresia Wambui
Treasury management importance cannot be underestimated particularly for sustained financial performance of commercial banks. The study was guided by risk management theory and liquidity preference theory. 43 licensed commercial banks in Kenya were studied to achieve the study objectives. Data was obtained from secondary data sources and primary data sources using a questionnaire. The findings were that four main treasury management practices were adopted by the commercial banks and included funding strategies, investment strategies, liquidity management and risk management. The treasury management practices studied were perceived to explain 67.6% of the financial performance of the studied commercial banks in Kenya. The number of significant treasury management practices reduced with increase in bank size. The study concluded that funding strategies, investment strategies, liquidity management and risk management strategies were the main determinants of financial performance among commercial bank. However, evaluation of the size of the commercial banks was concluded to be paramount during the formulation and integration of the treasury management decisions. The study recommended that treasury management practices should be a target mainly for small and medium commercial banks that seek to increase their financial performance. Additionally, the researcher recommended that the management of the banks should institute appropriate internal mechanisms to put mechanisms of having periodic and regular review of the treasury practices in line with their bank size. The study ensured originality in defining the research and adopted content where all sources were fully recognized. The study limitations included data collection confidentiality concerns and extracting of data from the financial statements due to varying reporting by commercial banks.
Effects of performance appraisal systems on employee performance of multinational companies in Nairobi County
(Strathmore University, 2019) Mariti, Elizabeth Wanjiku
To gain a competitive advantage in a rapidly changing global economy, multinational firms are increasingly promoting high levels of employee performance through conducting effective performance appraisals. Performance appraisal is therefore a critical and strategic human resource practice adopted by many Multinational corporations to evaluate and continuously improve the performance of employees and the organization. The aim of this study was to analyze the influence of performance appraisal systems on employee performance of multinational companies in Nairobi County. The specific objectives included to establish the performance appraisal methods used by multinational companies in Nairobi County, to analyze the influence of perceived appraisal effectiveness on employee performance of multinational companies in Nairobi County, to examine the influence of perceived appraisal fairness on employee performance of multinational companies in Nairobi County , to analyze the influence of perceived quality of appraisal feedback on employee performance of multinational companies in Nairobi County, to determine the joint influence of perceived appraisal effectiveness, perceived appraisal fairness and perceived quality of appraisal feedback on employee performance of multinational companies in Nairobi County. The main data collection tool that was used was the questionnaires with a target population of 285 employees of multinational companies with a presence in Nairobi County. Descriptive statistics, correlation analysis and multiple correlation analysis were used to analyze the data. On the influence of performance appraisal systems on employee performance perceived appraisal effectiveness, perceived appraisal fairness and perceived quality of appraisal feedback were all significant in explaining changes in employee performance. Results on the combined influence of performance appraisal systems on employee performance however showed that perceived quality of appraisal feedback had a significant positive influence on employee performance while perceived appraisal effectiveness and perceived appraisal fairness were not statistically significant. The study however had limitations as it only focused on three performance appraisal variables and limited employee performance to accomplishment of job related and organizational goals.

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