Changes in share prices as a predictor of accounting earnings for financial firms listed in Nairobi Securities Exchange

Danson Musyoki

Abstract

This study examines the predictability of accounting earnings using changes in share prices of companies listed at the Nairobi Stock Exchange in the finance and investment sector. The study covered
the period between the year 2001 and 2005. The data was obtained from the Nairobi Stock Exchange, where the information selected were Earnings per share, Dividend yield, Price to earnings ratio and the share price. This information was standardized using logarithm and analyzed using the SPSS program. The OLS was used to come up with an equation. Eleven companies were analyzed and all of them had positive change towards the accounting earnings in relation to the share price. Additionally, the relationship between accounting variables and the Nairobi Stock Exchange information indicated mixed results, with some companies showing a strong positive correlation and others weak correlation.

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