Relationship Between Earnings Management and Stock Market Returns Among Companies Listed in Nairobi Securities Exchange

Abstract

The main objective of this research study was to establish the relationship between earnings management and stock market returns among companies listed in Nairobi Securities Exchange. The study adopted a descriptive research design aimed at investigating the relationship between earnings management and stock market returns among companies listed in Nairobi Securities Exchange. The population of the study consisted of 66 companies quoted in the Nairobi Securities Exchange as at 31st December 2014. The study used a census approach. The study found that earnings management, firm size, and market to book value ratio, influenced stock return. All of the variables influenced it positively. The results show that the intercept was 1.103 for all years. The study found that the coefficient for earnings management was 0.852, meaning that earnings management positively and significantly influenced the Stock return among companies listed at the Nairobi Securities Exchange in Kenya. The study also found that the coefficient for firm size was 0.654, meaning that Firm size positively and significantly influenced the stock return among companies listed at Nairobi Securities Exchange. The study concluded that the coefficient for market to book value ratio was 0.231, meaning that market to book value ratio positively and significantly influenced the stock return among companies listed at Nairobi Securities Exchange.