The effect of financial performance announcement on share returns of firms listed at the nairobi securities exchange

Abstract

Corporate events have numerous effects on the stock market and it has been observed that share price movements is an area of research that has attracted the attention of various researchers, Firms listed in the security markets are required by law to communicate periodically their financial performance to stakeholders through financial announcements. However, efficient markets immediately absorb and reflect the new information into the share prices. This paper examines the effect of financial performance announcement on share returns of firms listed at the Nairobi securities exchange by analyzing daily share prices and market returns for the period between 2010 and 2013, using the event study methodology, secondary data was collected and analyzed using the market model. The results obtained indicate that the average abnormal returns were not significant at 5% probability level. Thus the NSE is of semi-strong efficiency, whereby it is not possible to earn abnormal returns in the NSE using the publicly available information.