SMC Scholarly Articles

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60 @ 60: Development of the Nairobi Securities Exchange
(Strathmore University, 2014) Waweru, Freshia
The Nairobi Securities Exchange (NSE) was established in 1954 and recently celebrated its 60th anniversary. However, the number of listed companies over this period have been minimal – currently, there are 63 listed companies but four has been suspended from trading. This study therefore sought to investigate the specific factors influencing company listings at the NSE. The study sought to establish: first, the factors that influences listing decision among the listed companies; and secondly; to establish why some companies, which have met the listing requirements threshold have not opted to publicly list despite the numerous efforts by the exchange. For the first objective, a regression analysis was carried out to determine which factors influences listing decision. The factors analyzed included; stock market liquidity, stock market volatility, the legal and regulatory framework, and political environment. The industry, market automation and taxation were used as control variables. The model was significant at 5% lever with an adjusted R squared of 68.8%. Political environment was the most significant variable followed by stock market liquidity and then stock market variability. The industry into which a company belongs to as well as the market automation were found to be insignificant at 5% significant levels. The second objective used questionnaires to establish why the non listed companies which have met the listing requirements were not yet listed. Most non-listed considered the legal and regulatory framework as too stringent and hence the leading hindrances to listing. The companies also considered the listing and maintenance costs as too high. In addition, most companies did not want the public scrutiny that accompanies a listed company. Other companies were family owned and wanted the status quo while others did not want dilution of ownership. Most of the non listed companies considered access to wide capital base as the leading reason why they could consider listing. To increase the number of listings therefore, the NSE as well as the Capital Markets Authority (CMA) should ensure that the market is liquid. This would ensure that the companies are able to access capital easily. The ongoing efforts to widen the number of products available should continue to attract more investors. Also, the rules and regulations should be reviewed to make sure they are not too stringent. There is need to review the listing costs which were considered as too high. The NSE should constantly communicate with the prospective companies the measures they are taking to encourage listings. The government should also ensure a stable political environment.
60 @ 60: Development of the Nairobi Securities Exchange
Waweru, Freshia Mugo
The Nairobi Securities Exchange (NSE) was established in 1954 and recently celebrated its 60th anniversary. However, the number of listed companies over th is period have been minimal - currently, there are 63 listed companies but four has been suspended from trading. This study therefore sought to investigate the specific factors influencing company listings at the NSE. The study sought to establish: first, the factors that influences listing decision among the listed companies; and secondly; to establish why some companies, which have met the listing requirements threshold have not opted to publicly list despite the numerous efforts by the exchange. For the first objective, a regression analysis was carried out to determine which factors influences listing decision. The factors analyzed included; stock market liquidity, stock market volatility, the legal and regulatory framework, and political environment. The industry, market . automation and taxation were used as control variables. The model was significant at 5% lever with an adjusted R squared of 68.8%. Political environment was the most significant variable followed by stock market liquidity and then stock market variability. The industry into which a company belongs to as well as the market automation were found to be insignificant at 5% significant levels. The second objective used questionnaires to establish why the non listed cornparues which have met the listing requirements were not yet listed. Most non-listed considered the legal and regulatory framework as too stringent and hence the leading hindrances to listing. The companies also considered the listing and maintenance costs as too high. In addition, most companies did not want the public scrutiny that accompanies a listed company. Other companies were family owned and wanted the status quo while others did not want dilution of ownership. Most of the non listed companies considered access to wide capital base as the leading reason why they could consider listing.
An assessment of the moderating role of employees’ cultural orientations amongst foreign manufacturing multinational companies in Kenya
(AOSIS OpenJournals, ) Dimba, Beatrice; Rugimbana, Robert
Over the last ten years or so, significant differences of opinion have emerged ar ound two related issues. How to adequately implement strategic human resources strategies to improve firm performance and, whether or not a ‘ bundle of HR best practices ’ exists that can be applied in all contexts with predictable outcomes. In regards to the first issue, the question of whether a direct link between strategic human resources management (SHRM) practices and firm performance exists, the arguments are equivocal. Some studies have demonstrated the existence of direct links between SHRM practices and firm performance (Edwards & Wright, 2001). Other studies (Dimba, 2010; Katou & Budhwar, 2006) have shown that SHRM practices do not lead directly to business performance but rather they influence employee motivation. In other words, it is employee outcomes that ultimately influence performance.
Culture and organization performance
(Springer Berlin Heidelberg, 2013) Dimba, Beatrice A; Samuel O. Idowu; Nicholas Capaldi; Liangrong Zu; Ananda Das Gupta
These synonyms show at least two different groups of uses which should be stressed here. SHRM practices also known as high performance work practices (HPWP), or best practices, are those decisions and actions which concern the management of employees at all levels in the business, and which are related to the implementation of strategies directed toward sustaining competitive advantage (Kramar 1992). Examples include recruitment practices, staff appraisal systems, remuneration systems, and flexible work arrangements. Culture is the beliefs, values, assumptions, attitudes, and behaviors of a group of people. National culture is defined as the values, beliefs, and assumptions learned in early childhood that distinguish one group of people from another (Aycan et al. 2007).
Database marketing strategies in the industry: case of Kenyan organizations
(North American Institute of Science and Information Technology, 2013-03) Lukandu, Ismail A; Dimba, Beatrice A; Omwenga, Vincent O
Problem Statement: There are several organizations in both the private and public sector that collect information about their customers but do not proactively leverage on it. In most cases, the collected information would lie unused or underutilized for long periods and yet these same organizations do struggle business-wise. A major point is that they could actually utilize the information to create new avenues to the benefit of the organizations. Methodology: The methodology adopted for this research was to survey several private sector organizations. A sample of thirty-two (32) organizations out fifty (50) accepted to take part in the Database Marketing Survey. This survey consisted of organizations in the private sector ranging from airline industry, information and communication technology industry, retail and services and healthcare industries. We were interested to access information on what types of customer information they typically collected, stored and/or interpreted and how the organization’s databases were generally designed. Further, we needed to determine the frequencies of inaccuracies in the data collected, the liabilities/implications of incorrect data, the applied techniques (systems) to maintain data integrity and the maintenance systems and of the databases, which database formats were most successful, which procedures of data gathering were most reliable and subtly, which off-the-shelf programs were better for design of a customer database for the organizations. Results: Our preliminary analysis indicated these organizations routinely collected and stored customer information for various purposes. It was noticed that though most organizations collected data, it was mostly inaccurate, duplicate, inconsistent and non-standard. In this regard, it was extremely difficult to really harness or leverage on it. Due to this state of affairs, the organizations could not easily relate to the fact that the core data errors could be a pointer to lost revenue, lost opportunities or money wasted pursuing false assumptions or inaccurate accounts. Conclusions: The type of database design used by the private sector industries in Kenya is largely dependent on the “Off-the-Shelf” programs. The design of a customer database for an organization was largely related to the type of “off-the-Shelf” with a correlation coefficient of 0.738. Most organizations collected and stored data that can be described to be personal information from the customers and this information was predominantly used for the purposes of business growth, that is, sales at 73.91% and marketing at 56.62% though not strategically.
Does board diversity leadership affect corporate decisions and risk control? evidence from Kenyan commercial banks
Mboya, Josphat Kiweu
The aim of this paper is to provide preliminary analysis of the relationship between corporate decisions, risk taking behavior and gender diversity. Using a panel of 28 Kenyan banks over the period 2000-2009, the study examined effect of corporate leadership in banks (number of female directors, proportion of female directors on boardrooms and gender presence in boards) and its value to board effectiveness, strategic control and monitoring of management. After controlling for relevant sources of endogeneity, the value of women in bank boardrooms could not be clearly justified. Particularly, the results show a negative association between profitability and female directors on the board and that diverse board in Kenyan banks probably lack decision control or are less effective. The study also shows that in the context of an emerging country, there is increased gender diversity in boards with women holding 9% of bank board seats in 2009. Larger boards and larger firms in addition to a long history of existence determine women appointment to the board. The study also finds evidence of a high risk appetite for a women director that does not pay off. In addition, the results support a positive association between gender diversity and financing costs. Overall, the results indicate tokenism is a key practice in the Kenyan banking sector.
Effect of board gender diversity on the performance of commercial banks in kenya
Ekadah, John Wachudi; Mboya, Josphat Kiweu
The purpose of this paper was to analyze the effect of board gender diversityon performance of commercial banks in Kenya for the period 1998-2009. Stepwise regression was used to analyze the effect of board diversity on performance. It was found that boards of commercial banks in Kenya are male-dominated. On average, out of a typical board size of 8 members,only 1 is a female director. Finally, this study finds that board diversity has no effect on performance of banks in Kenya.
The effect of strategic human resource management practices on performance of manufacturing multinational companies in Kenya: moderating role of employee cultural orientations and mediating role of employee motivation
(2009) Dimba, Beatrice A; K’Obonyo, Peter
This study linked strategic human resource (SHRM) practices, cultural orientations, employee motivation and firm performance in foreign manufacturing multinational companies (MNCs) in Kenya. The objectives were: to establish the relationship between SHRM practices and firm performance; to determine the extent to which the relationship between SHRM practices and employees’ motivation depends on employees’ cultural orientations; to establish if the relationship between SHRM practices and firm performance is mediated by employees’ motivation; to gauge the relationship between motivation and firm performance. The respondents were HR managers, marketing managers and production managers, and nonmanagement employees working in 50 foreign MNCs. Data was collected using questionnaires developed by Hofstede and Huselid and modified by the researcher. Hofstede’s instrument contains measures of employees’ cultural orientations, whereas Huselid’s instrument contains measures for SHRM practices, motivation and performance. The findings of the study indicate that: all the variables of SHRM practices, except recruitment and selection were positively and significantly correlated with performance; relationship between SHRM practices and firm motivation did not depend on employee cultural orientations in the case where cultural beliefs were considered, but depended on employee cultural orientations when cultural values were considered; motivation mediated relationship between SHRM practices and firm performance; and motivation affected firm performance.
Factors affecting institutional transformation for regulated MFIs
Mboya, Josphat Kiweu; Ndulu, John Kimuli
Purpose - Regulating microfinance activities has been an important policy concern in improving financial inclusion and extending financial services to all. However, introducing a regulatory framework of any kind pushes targeted institutions to change. In this case, microfinance regulatory framework in Kenya that came to effect in 2008 has created three tiers of microfinance institutions: prudentially regulated deposit-taking institutions, credit only and unregulated informal groups. Those undertaking deposit-taking business were required by this regulation to transform their operations to comply with the requirements. Though many institutions wanted to be allowed to mobilise public deposits, only six institutions had managed to obtain a license in four years after the regulation became operational. The purpose of this research was to establish the factors affecting this microfinance transformation process. Design/methodology/approach – The research was carried out by collecting empirical evidence from microfinance institutions target by regulation in Kenya to establish these factors contributing to the slow phase of transformation. The possibility that the challenges could be affecting both the regulator and institutions being regulated was explored. Findings – This study identifies several important factors affecting the transformation process of microfinance institutions in Kenya. These include the ability to meet capital requirements, restructuring existing ownership and getting new shareholders, ability to raise funds for transformation, acquiring suitable information systems, motivation to be regulated, governance issues and managerial inertia. These factors explain why certain institutions have moved faster than others in the transformation process and why some have opted to remain credit only. Research limitations – The availability of reliable database of microfinance institutions that were a target for this study was a challenge affecting sampling and reach. In addition, data collected was limited to one point of contact yet some factors could relate to operational process. Originality/value – The study broadens research to transformation process of regulated microfinance institutions, factors affecting them and regulatory framework.
Factors behind exchange-traded derivatives products success
Waweru, Freshia Mugo; Kim, Yu-Kyung
This paper empirically analyzes factors behind successful derivatives products in the emerging markets of the Asian region. Successful derivatives products are defined as contracts with high trade volume. The influencing factors are the size of the underlying spot market, the spot market volatility, the spot market liquidity, whether the derivatives product was the first contract introduced in the derivatives exchange, and whether the product was options or futures. We find that the size of the underlying spot market, the spot market volatility and the spot market liquidity have statistically significantly positive effect on the trading volume of the derivatives products. Moreover, if the derivatives product was the first derivatives product introduced in the exchange, it is more likely to be successful. Option contracts are relatively more successful than their respective futures contracts in terms of trading volume, which could be due to the costs associated with margin requirements.
Financial Services Regulatory Modernization in East Africa: The Search for a new
(International Journal of Humanities and Social Science, ) Gakeri, Jacob K
This article interrogates the appropriateness or suitability of the single or unified regulator financial services regulatory system in East Africa with Kenya as the reference point, in the context of financial services regulatory modernization. Using multiple jurisdictions, the article exemplifies the workings of the different regulatory systems. Drawing from experiences in other jurisdictions and the circumstances in Kenya, the discussion establishes that the prevailing market conditions cannot justify the shift to a unified regulator. The analysis makes the argument for retaining the current fragmented regulatory system over the short term, albeit with certain reforms.
Impact of globalization on the human resource management function in developing countries: a case study of Kenya public corporations
(Africa Journals Online (AJOL), ) Gachoka, Hazel
This study seeks to establish if the adoption of International Financial Reporting Standards (IFRS) in Kenya has been associated with higher accounting quality for listed companies. The International Accounting Standards Board (IASB), in its objectives and preamble, supposes that the beneficial effects from IFRS adoption include transparency, accounting quality and reduced cost of capital. Based on these assumptions, this study applied accounting quality measures; earnings management, timely loss recognition and value relevance to find out whether the adoption of IFRS has led to improvements in accounting quality in companies listed in Kenya. The methodology is based on prior literature definition of metrics of accounting quality mainly earnings management, timely loss recognition and value relevance. The study differs from the previous ones by overcoming difficulties in controlling for confounding factors faced in previous studies which could have led to less reliable results. Three out of the eight metrics indicated that quality had marginally improved while five indicated that it had marginally declined. These mixed outcomes are very much in line with findings in other studies and the study contributes to the debate by explaining why accounting quality outcomes are still not consistent with IFRS promises in spite of improved test conditions.
Influence of culture on strategic human resource management (SHRM) practices in multinational companies (MNC) in Kenya: a critical literature review
Dimba, Beatrice; Obonyo, Peter K.
Extant theories of strategic human resource management (SHRM) practices and cultures have generally adopted on the one hand the assumption that organizations develop a culture of their own that is distinct from the national and industry contexts in which the organization is embedded, thus ignoring the potential impact of external environmental factors on organizational culture. On the other hand, some researchers and scholars have questioned the validity and reliability of national culture-SHRM practices research. The current paper explores the employee cultural values in the Kenyan multinational companies (MNCs) and the influence of culture on SHRM practices. Hofstede’s cultural dimensions of collectivism, power distance, uncertainty avoidance, and femininity are applied. These value dimensions reflect human thinking, and feelings of people, which pose basic problems that any society has to cope with but for which solutions differ.
Is there profit from bonus share announcements in Nairobi Securities Exchange?
(International Institute for Science, Technology and Education, ) Mboya, Josphat Kiweu; Ndegwa, James N.
The question of whether the announcement of issuance of bonus shares by quoted companies is news to stock market participants or it is anticipated by the market has been the subject of research. If the announcement is anticipated, then stock prices should not change drastically during the days surrounding the announcement date.This research employed the event study methodology by using the bonus announcements of eighteen NSE listed companies that occurred during the year 2005 to 2010. The t-test statistic was employed to test the significance of the average abnormal returns and cumulative average abnormal returns from zero. It is possible to profit from bonus share announcement when the abnormal or abnormal returns are significant from zero. The results of ttestson the average abnormal return (AAR) and the cumulative average abnormal return (CAAR) indicated that abnormal returns were significantly different from zero which implied that implied that there is an anomaly in the semi-strong form efficiency of the NSE with regards to bonus announcements as it is possible to profit from such announcements which is regarded as news by NSE investors.
Leveraging donor funds: the switch to commercial sources of funding
Mboya, Josphat Kiweu
Sustainable livelihood strategies in microfinance are a major force behind enterprise development in poor societies. But uncertainty of continued donor funding poses a risk to operations. This paper presents findings on, critical success factors that define minimum pre-conditions for microfinance institutions considering commercial funding as an alternative. The study is conducted on broad -based industry experts responsible for making funding decisions. Paper explores what it takes to finance MFIs through leveraged funds and argues that key transitional factors are critical for a successful switch to commercial funding. A realistic checklist for self-assessment of MFI's progress in a commercialization strategy is proposed.
Multi-theoretical perspective of corporate environmental reporting: a literature review
(A Review Integrative Business & Economics Research, ) Wangombe, David
The purpose of this paper is to analyze the different theoretical perspectives used in the study of Corporate Environmental Reporting (CER) so as to present the areas of overlap that would support the case for a multi-theoretical approach. It responds to researcher’s quest to find a theoretical framework that can be used to adequately explain and predict CER behaviour so as to establish ways in which CER can attain high quality. This paper employs a critical analysis of literature. Early years of CER studies tended to herd around specific theories, but recent times have seen advocacies for a multi-theoretical approach. The paper argues that researchers need to carefully reflect on the theoretical motivation and methodologies they use to make claims about CER behaviour especially where such claims aim at improving the practice of CER, making a contribution to policy making, and contributing to the good of the wider society.
Participatory orientation to strategic planning process : does it pay?
Arasa, Robert M.
It is postulated that a participatory orientation to the strategic planning process could influence the realization of the expected strategic planning outcomes. Past studies investigating the relationship between strategic planning and performance mainly focuses on the direct relationship between these two variables. This study examines the influence of employee participation on the expected relationship between strategic planning and strategic planning outcomes. The study was carried out in Kenya, within the insurance sector. A structured questionnaire was used to gather the required data from 31 firms. Study findings reveal that employee participation does influence the strength of the relationship between strategic planning and strategic planning outcomes and this influence is statistically significant.
Regulating Kenya’s securities markets: an assessment of the capital markets
(International Journal of Humanities and Social Science, ) Gakeri, Jacob K
The importance of an optimal regulatory and enforcement matrix in enhancing securities markets cannot be overemphasized. Countries with deep and vibrant securities markets generally have effective regulatory and enforcement philosophies. This paper seeks to characterize the regulatory and enforcement paradigms of Kenya's securities markets in the context of the global regulatory and enforcement philosophies. From the analysis, it is evident that the regulatory paradigm is indissolubly government or national with nominal self-regulation. Although the statutory framework enshrines self-regulation, the relevant provisions are ambiguous and remain ineffectual. The notion of self-regulation remains an illusion. The regulator enjoys plenary legislative and supervisory powers over market intermediaries and listed companies without being subject to meaningful accountability mechanisms. Amendments to the Capital Markets Act and its Regulations have consolidated the Capital Markets Authority’s position as a paramount regulator. Finally, the enforcement history of the Capital Markets Authority discloses no decipherable philosophy. Enforcement actions have been intermittent and reflect no imperatives.
Relaxing financing constraint in the microfinance industry : is commercialization the answer?
Mboya, Josphat Kiweu
A critical question facing Microfinance Institutions (MFIs) is whether they can attract commercial capital as a solution to their financing problem and as a way of relaxing strained development aid. While donations have made enormous contributions to microfinance development and poverty reduction among the poor to date, an attempt to scale-up funding from this traditional source has been an uphill task. It is argued that vast resources of commercial capital can become available to microfinance if critical success strategies of access to commercial funding are developed. This paper offers research evidence that identifies significant predictors for successful Commercialization of microfinance based on firm-level data from African MFIs for three financial years between 1998 and 2003. The research develops and tests a commercial rating rule (predictive model) for determining success in tapping commercial capital. The results indicate the emergence of new finance sources, widened financing options for MFIs and the capacity to relax growth constraints in the industry. However, the findings also suggest the need for MFIs to satisfy the interests and requirements of prospective commercial investors to overcome new challenges.
St. Cleophas girls’ boarding secondary school : global business schools network.
Otieno, Hellen
On 1st June 2005, Mr. Eric Ndambuki, owner and Principal of St. Cleophas Girls’ Secondary School was at his desk. He realized that the ten-year lease agreement for the school building signed in the year 2001 was already halfway through. Yet he had not succeeded in making any savings to buy land and to build his own school to relocate the St. Cleophas as he had initially planned. He had hoped that he would save enough money in the first four years of operation to buy a piece of land adjacent to the school. He would then save for another four years. In the ninth year he had planned to start the construction so that in the tenth year, he would relocate St. Cleophas to a fully owned building. However, looking at the school’s current financial situation, he knew that had not happened. Even worse it would not happen unless he implemented some drastic changes in the financial aspects of his management. He wondered what action plans and financial management he could take.

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