Determinants of Stock Price Behaviour After Initial Public Offer for Firms Quoted at Nairobi Securities Exchange

Abstract

Macroeconomic stability and foreign private capital inflow has no effect in determination of stock prices. Therefore, there is need for further research that is aimed at establishing if macroeconomic instability and foreign private capital inflow will affect the stock prices before an IPO. In addition, future studies should focus on behavioral factors or the study could compare different East African nations. The present study analyses the share price performance of eight firms and seeks to identify the factors that influence share prices for the selected firms in various sectors at NSE by developing a model (s) for share price determination. Data was collected on the eight variables under study for a period of five years (2003 – 2013) and regression analysis was utilized to determine the effect of selected macroeconomic variables on the share prices of eight companies at NSE and the share prices for the companies were analysed in terms of change in magnitude. The general results indicated that there is no one model to predict share prices at NSE. Overall the R-Square of all the regressions was generally low (from 4.4 percent to 3 percent) denoting that the strength of association between the variables was low and other factors influence share price.The results of the empirical analysis are consistent with most of the findings in the literature review and support the evidence that the selected determinants have little effect on share price. This could have been influenced by the period under study (Ten years) and maybe with a longer time period the results could be different.