The Effect of Selected Accounting Variables on Stock Returns Among the Companies Listed at the Nairobi Securities Exchange

Abstract

This study sought to establish the effect of selected accounting variables on the stock returns among the companies listed at the NSE. For the purpose of the study three accounting variables were selected namely Net Assets Value per Share, Earnings Per Share and Dividend Yield. The study was motivated by the fact that despite many studies that have been conducted on the determinants of stock returns at the NSE, none of these studies investigated the effect of Net Assets Value per Share, Earnings Per Share and Dividend Yield at NSE for the period 2009 – 2013 despite the growing interest in investing at the NSE. The population consisted of companies that had filed their financial statement consistently for the period under research 2009 – 2013. The study was conducted through census where all the companies that had filed their financial statement consistently for the period under research 2009 – 2013.Fourty six companies were studied. The data was collected from secondary sources .The data was analyzed using SPSS which generated both descriptive and inferential statistics. The result of the study showed that both Earnings Per Share and Dividend Yield are have a positive relationship with stock returns and that they are significant in explaining stock returns. On the other hand Net Asset Value per Share was found to have a negative but weak relationship with stock returns and that it was insignificant in explaining stock returns. It is recommended that investors should consider the expected Dividend Yield and Earnings Per Share while deciding on what stock to invest in at the NSE. This is because the results showed that the higher the Dividend Yield and Earnings Per Share the higher the stock returns. It is further recommended that to enhance the stock returns for the stockholders, companies should adopt high dividend payout ratio policy since DY is a function of amount of dividend paid.