AN EVALUATION OF FACTORS INFLUENCING SHARE PRICE BEHAVIOUR OF COMMERCIAL BANKS LISTED IN THE NAIROBI SECURITIES EXCHANGE

The factors affecting the price of an equity share can be viewed from the macro and micro economic perspectives. These factors will affect the demand and supply of a stock in the market which in turn will affect the price of the stock. The purpose of the study was to evaluate selected factors influencing share price behavior of commercial banks listed in the NSE. The factors to be evaluated were dividend per share, financial leverage, book value per share and interest rates. The study utilized published financial statements of the listed commercial banks, the average lending rates charged by the banks to its customers as a measure of interest rates, and the daily share prices of the commercial banks. Statistical Packages for Social Sciences (SPSS) was used by the researcher to facilitate the analysis and interpretation of data and the results obtained was presented using tables for easy interpretation. The study used correlational and longitudinal research design. Significance of each independent variable and the hypothesis was tested using ttest statistic. The p-value for each t-test was used to make conclusions on whether to not reject or reject the null hypotheses. The benchmark for this study to reject or to accept the null hypothesis was a level of significance of 5 percent. The correlation results indicated that dividend per share had a strong positive correlation while book value per share and financial leverage had a weak positive correlation on market price per share of commercial banks. The regression analysis and test of hypothesis showed that dividend per share and book value per share had a significant effect while financial leverage had no significant effect on the market price per share of commercial banks. This study will be useful to the investors, the decision makers of commercial banks, the CMA and NSE Policy makers, the government and the scholars. The researcher recommends that further research can be extended to cover longer time periods, more firms and more macroeconomic variables.