INVESTMENT DIVERSIFICATION AND FINANCIAL PERFORMANCE OF INVESTMENT FIRMS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA

Rosa Mukami Nyaga, Dr. CPA Hesbon Otinga, Dr. Julius Miroga

Abstract


Financial performance of investment firms has been challenged by many emerging factors which are exacerbated by dynamic business environment. Many scholars have used firm related factors, both internal and external to evaluate contributing factor to investment firms’ performance with little regard to portfolio diversification approaches. Therefore, lack of adequate empirical evidence on the significant effect of investment diversification on financial performance of investment firms listed at Nairobi Securities Exchange, Kenya. The specific objectives were to determine the effect of investment in shares and real estate investment on financial performance of investment firms listed at Nairobi Securities Exchange, Kenya. Capital Asset Pricing Model (Real Estate Investments), and Keynesian Theory of investment (Investment in shares) informed the study. The study adopted descriptive survey design and used a secondary data collection sheet to collect secondary data. The study targeted investment firms listed at NSE where a census method was used. This study covered a 5-year period from 2017 to 2023. The study used secondary data that was extracted from the websites of the respective listed firms. Descriptive statistics summarized data into meaningful forms while for variable relationships, inferential statistics was computed using STATA 15. All analyzed data was presented in form of tables and graphs. The findings revealed that investment diversification has positive effect on financial performance of investment firms listed at Nairobi Securities Exchange, Kenya although there was mixed outcome in regards to significant effect. Investment in real estate and shares were found to have significant effect In this regard, the study concluded that investment diversification has positive effect on financial performance of investment firms listed at Nairobi Securities Exchange, Kenya. Firms should also consider the maturity periods of these securities to balance liquidity and returns.

Key Words: Investment Diversification, Financial Performance, Investment Firms, Nairobi Securities Exchange, Investment in Shares, Real Estate Investment


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