Signaling as a determinant of rights issue performance in Nairobi Securities Exchange
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The study sought to establish signaling as a determinant of rights issue performance in the NSE. To achieve this, the study used specific objectives. The object one was to establish debt-servicing capability of the rights issuing firms, to establish signal interpreted by the equity investors regarding the financial soundness of the rights issuing firms, to establish perception of management of rights issuing firms regarding the financial literacy of equity investors and to establish other determinants of rights issue performance at the NSE. Specific objectives one up to three were analyzed using descriptive statistics while specific object four was analyzed using regression analysis. The result of objective one indicated that financially distressed firms are facing liquidity problems therefore might not be able to service debt regularly. This might be the reason for the rights issue. The findings showed that signaling also influences the rights issue performance and therefore should be regarded as one of the determinants of rights issue performance. In the fourth objective, regression result indicated that the adjusted R square was 46.6% implying that independent variables were able to explain up to 46.6% of dependent variable (rights issue performance). ANOVA results indicated a p-value of 0.002, which was below 0.05 level of significance implying that the independent variables were jointly significant in predicting rights issue performance. The regression coefficient results indicated that cash flow was the only determinant that had significant and positive influence on the rights issue performance. i.e. Increase in cash flows was associated with increasing in rights issue performance. The findings from primary data and secondary data were both in consonance with the signaling theory that cash flows are significantly influential to rights issue performance i.e. equity investors respond positively to rights issues if cash flows of the company are increasing.