The Effect of Tax Payments on Stock Returns of Companies Listed at Nairobi Securities Exchange

Abstract

Investors consider a number of factors before making their decisions to invest in a particular firm. One of the most important factors to consider is stock returns by individual firm. The researcher in this study therefore, looks at the effects of tax payments on stock returns for firms listed at the Nairobi Securities Exchange. The researcher conducted a census study for all companies listed at the NSE by the year 201 4. Data on total tax paid, total assets, and volume of shares traded daily were collected for the years 2010-2014 for these companies. Descriptive research design was used where data was analyzed by the use of SPSS. There was a mild positive correlation between tax paid and stock return with a total Pearson’s Correlation of 0.094. There was a negative relationship of size and stock return with a significant Pearson’s Correlation of -.062. A positive relationship was found between volume of shares traded and stock return with a Pearson’s Correlation of 0.03. The regression analysis had a coefficient of determination of 0.019 with an estimate of 0.138. The study found a mild positive relationship between tax payments and stock returns.