INVESTMENT IN STOCKS AND FINANCIAL PERFORMANCE OF INVESTMENT FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE (NSE)

C B Mwashumbe, D O Agong, E. M Kimani

Abstract


The financial performance of investment firms listed on the Nairobi Securities Exchange (NSE) is strongly influenced by their stock investment strategies. Poor allocation and exposure to volatility have led to declining profitability and weakened investor confidence. Approximately 60% of NSE-listed investment firms reported profit declines in the past five years, alongside a 12% reduction in foreign investment inflows. Guided by Modern Portfolio Theory (MPT), this study examined the effect of stock investments on the financial performance of NSE-listed firms, measured using Return on Equity (ROE). A descriptive research design and census approach were applied to all five investment firms listed between 2014 and 2023. Secondary data was collected from audited financial reports, NSE records, and Capital Markets Authority publications. Panel regression and diagnostic tests ensured statistical robustness. Results revealed that stock investments significantly and positively influence financial performance, though with notable exposure to volatility risks. The study concludes that well-managed equity portfolios enhance profitability and investor trust. Findings provide practical implications for firms, regulators, and policymakers seeking to strengthen investment practices in emerging markets.

Key Words: Investment in Stocks, Financial Performance, Investment Firm, Nairobi Securities Exchange


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