Abstracts 2019 July Graduation

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Abstracts 2019 July Graduation ABSTRACTS 2019 JULY GRADUATION PHD SCHOOL OF BUSINESS FINANCING DECISIONS AND SHAREHOLDER VALUE CREATIONOF NON- FINANCIAL FIRMS QUOTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA KARIUKI G MUTHONI-PHD Department: Business Administration Supervisors: Dr. Ambrose O. Jagongo Dr. Joseph Muniu Shareholder value creation and profit maximizing are among the primary objectives of a firm. Shareholder value creation focuses more on long term sustainability of returns and not just profitability. Rational investors expect good long term yield of their investment. Corporate financial decisions play an imperative role in general performance of a company and shareholder value creation. There have been a number of firms facing financial crisis among them; Mumias Sugar Ltd, Uchumi Supermarkets Ltd and Kenya Airways Ltd. All these companies are quoted at the Nairobi Securities Exchange. Due to declining performance of these companies, share prices have been dropping and shareholders do not receive dividends. This study investigated the effects of financing decisions on shareholder value creation of non- financial firms quoted at NSE for the period 2008-2014. The study was guided by various finance models; which include, Modigliani and Miller, Pecking Order Theory, Agency Free Flow Theory, Market Timing Theory and Capital Asset Pricing Model. The study used general and empirical models from previous studies as a basis for studying specific models which were modified to suit the current study. The study was guided by the positivism philosophy. The study employed explanatory design which is non-experimental. Census design was used as the number of non- financial firms at the time of the study was 40 companies. The data was gathered from NSE handbooks and CMA publications comprising of annual financial statements, income statements and accompanying notes. Ordinary Least Square regression analysis was conducted to examine the effect of various financing decision variables on shareholder value creation. Step wise regression technique was used to test for moderating effect of Gross Domestic Product growth rate. The results revealed that equity financing, debt financing, working capital financing and dividend financing had a statistically significant positive effect on EVA. The study further analyzed sector based differences among companies listed at the NSE. The results indicated significant differences among various sectors in respect to the effects of financing decisions on shareholder value creation. The study found that, the moderating effect between financing decisions on shareholder value creation and GDP growth rate had a positive and statistically significant effect. Feasible generalized least squares were used to estimate the model. Diagnostic tests were conducted to ensure non-violation of the assumptions of Classical Linear Regression Model. Among the tests conducted; includes panel unit root test, Autocorrelation, Homoskedasticity and Multicollinearity tests. Study model tests showed that, there was non-violation the assumptions and hence the model found fit for further analysis. The study recommends that managers of quoted non-financial companies should strive and practice periodic shareholder value creation analysis for continuous assessment of growth process. The government through the CMA should come up with regulatory framework that guide firm listed in enacted dividend policies. Further it is recommended that shareholder value creation report is enforced as an additional statement published by the firms quoted at the NSE, Kenya. Moreover, the government through Central Bank should employ fiscal and monetary policies aimed at reducing the cost of borrowing. RESOURCE ISOLATING MECHANISM AND COMPETITIVE ADVANTAGE AMONG COMMERCIAL BANKS IN KENYA PURITY WAIRIMU NDEGWA-PHD Department: Business Administration Supervisors: Dr. James M. Kilika Dr. Stephen M. A. Muathe Commercial banks in Kenya are facing intense rivalry within the industry. For these banks to survive, it is important that they respond to the changes in the external environment. Competitive advantage which has become the core focus of corporate strategy, has increasingly gained much attention in strategic management and is a concept which enables organizations to survive in the long-run. Studies done on competitive advantage show a number of empirical and theoretical gaps as they concentrated on the resources a firm should have to create competitive advantage but lacked explanation on which resource isolating mechanisms a firm should adopt to sustain the competitive advantage. The main purpose of this study was to establish the effect of resource isolating mechanism on competitive advantage among commercial banks in Kenya. The specific objectives in this study were to determine the effect of economic deterrence, identification of rival competitive advantage and exploitation of opportunities on competitive advantage among commercial banks in Kenya. This relationship was mediated by organizational capabilities and moderated by management characteristic and external environment. Descriptive and explanatory research design was employed in the study. The research population was all 40 commercial banks in Kenya. Purposive sampling was used to select a sample of 160 respondents from the key departments of Finance, Sales and Marketing, Strategy and Operations of all the 40 commercial banks’ headquarters in Nairobi. The data collection instrument used was semi-structured questionnaire. The variables characteristics were summarised using descriptive statistics. Hypotheses testing was done to determine the effect of the resource isolating mechanism on competitive advantage. The study found that economic deterrence was not significant and had negative effect on CA, identification of rival competitive advantage was significant and had positive effect on CA and exploitation of opportunities was significant and had positive effect on CA. There exists a significant partial mediation by organizational capabilities on the relationship between resource isolating mechanism and competitive advantage. The moderating effect of management characteristics was significant, whereas external environment was found not to have moderating effect on the relationship between RIM and CA. The study concluded that there exists a positive effect of resource isolating mechanism on competitive advantage. The study contributes to the body of knowledge as well as policy in terms of understanding the effect of resource isolating mechanism on competitive advantage. This study recommends that it is important for the commercial banks management to implement strategies that reflect the changes in the external environment and appropriate allocation of resources. Commercial bank should also effectively position the banks’ products, build strong customer relationships and focus on competitive activities which create and sustain competitive advantage. Further, the researcher recommends a similar study could be conducted to other sectors other than commercial banks for generalization purposes. SYSTEMATIC RISK AND PERFORMANCE OF THE STOCK MARKET IN KENYA Nathan Mwenda Mutwiri-PHD Department: accounting and Finance Supervisors: Dr. Job Omwagwa Dr. Lucy Wamugo Stock prices in Kenya have been experiencing drastic volatility in the recent past. In the year 2015 alone, the value of the listed companies shrunk by about Ksh 250 billion representing about 25% of the national government annual budget. Performance of stock market is an important proxy of a country’s economic environment. Globally, economists, financial analysts and investors are interested in comprehending the factors that affect the fluctuations of stock markets. When the stock markets operate smoothly and efficiently, they facilitate economic growth and lower business risk. Excessive fluctuations of stock prices (in the financial markets) affects the smooth operation of financial markets and consequently adversely affects the performance of an economy. Rational investors are keen in achieving their maximum expected rate of return of their investments including stocks; they constantly value and revise their portfolio composition so as to maximise their wealth. An effectively diversified portfolio minimises the unsystematic risk hence almost eliminating these risk associated with an individual asset. However systematic risks cannot be managed by simple diversification. Investors therefore need to understand the effect of these systematic risks on the stock performance. The study sought to determine the relationship between systematic risk factors and performance of the stock market in Kenya. The specific objectives of the study were: to establish the relationship between Interest Rates, Foreign Exchange Rate, Inflation, Gross Domestic Product, Trading volumes and Performance of stock market in Kenya. The study adopted a positivist philosophy and employed a correlation research design. The study targeted all the stock listed in the Nairobi Securities exchange. This study utilized the NSE 20 share index movements to measure the performance of the stock market in Kenya. The study was underpinned by the Efficient Market Hypothesis, Capital Asset pricing Model, Arbitrage Pricing theory, Keynesian theory and Mixture Distribution model as theories and models anchoring the study. The study investigated the long run and the short run relationships between the systematic risks and performance of stock markets in Kenya using ten years (2007 to 2016). The study used time series
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