Effect of Selected Investment Decisions on Financial Performance of Listed Manufacturing Companies in Nairobi Securities Exchange
DOI:
https://doi.org/10.47941/ijf.1050Keywords:
Investment decisions, Renewal decision, Expansion decision, Financial PerformanceAbstract
Purpose: The Manufacturing companies in Kenya play a vital role in the advancement of the National gross domestic product. Over the last two decades, the government of Kenya has been keen to improving infrastructure and creating an enabling environment to foster local Manufacturing sector. However, despite the effects being geared to the sector, reports has shown that very little growth has been achieved. Increasing competition, high cost of inputs and inadequate contingency planning and investment decisions have contributed to the declining growth. The main objective of this research study was to find out the effect of investment decisions on financial performance of listed manufacturing firms in Nairobi Securities Exchange. Specifically to aim establish the effect of renewal decision and expansion decision on financial performance of listed manufacturing firms in Nairobi Securities Exchange.
Methodology: The study adopted the resource based theory and modern portfolio theory to give an empirical discussion of the selected variables. The study relied on secondary data available for the findings. The observations used were from the year 2015 to 2019 and the population was comprise of 9 companies listed in NSE under manufacturing and allied. Descriptive and inferential statistics conducted to analyze the data collected. Correlation and regressions analysis conducted as the analytical tools to enable interpretation of the relationship of the study selected variables. After analysis the findings were presented in tables and figures.
Findings: The study established that there was a significant relationship between the investment decisions on the financial performance of the listed manufacturing companies in Kenya. Further, the study showed that expansion decision had a negative impact on return on equity performance. The interpretation was that expansion decision is an increase in firms' costs hence negatively affects financial performance. The R-squared were found to be 0.570094 and Adjusted R-squared 0.533507 respectively for ROE. This show that averagely investment decision taken are relevant in explaining the financial performance for listed manufacturing companies in Kenya.
Unique contribution to theory, practice and policy: The study concludes that, there is the need for enterprises especially those within the stock market to have management policy that work towards enhancing the Renewal and expansion Decisions and investing substantial resources toward this goal to improve financial performance.
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