Bio

Workshops attended 2012:

- Proposal Writing workshop - UNES

- Assessment of the Capacity of Business Schools and Other Institutions to  Support the Development of Entrepreneurship in Eastern Africa, University of  Nairobi , School of Business in Collaboration with Plymouth University Business  School and Funded by DFID.

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Publications


2016

D, E, D O.  2016.  The effects of Rights Issue Announcements on Stock Returns for Firms Listed at the Nairobi Securities Exchange. International Journal of Education and Research . 3(9):2411-5681. AbstractEffects_of_rights_issue_announcements_on_stock_returns_at_the_nairobi_securities_exchange-1.pdf

Rights issue is a secondary equity issue in which new additional shares are issued to the existing
shareholders in exchange for cash (capital) needed by a publicly quoted company, either for
expansion purposes or to finance company operations. The rights are issued to the shareholders in
the proportion of their existing holdings. Empirical studies give mixed results on the direction of
stock returns upon a rights issue announcement. Since there has been no consensus on how capital
markets generally respond to rights issue announcement, this study investigates the effect of rights
issue announcement on stock returns of companies listed at an organised exchange. The study
adopts an event study technique on a sample of twelve companies which issued rights between
January 1, 2007 and August 31, 2014. Secondary data on share prices is collected from the Nairobi
Securities Exchange (NSE) database. The study establishes that stock prices and returns changes
significantly in the post announcement period than in the preannouncement period. Analysis of
mean abnormal return reveales that rights issue announcement results into either positive or
negative stock return. Based on the cumulative average abnormal return (CAAR), the study
concludes that rights issue announcement results into a negative abnormal stock return for the listed
firms. The study therefore recommends that the investment banks and listed companies should
consider the negative abnormal stock price reactions and the subsequent negative abnormal stock
return changes to the announcement of rights issue while setting the discounted rights issue prices
so as to ensure that during the issue period, the stock trading prices do not fall below the rights issue
price, a fact that can lead to the collapse of the rights issue exercise. The study recommends further
academic exploration on the effects of repeat rights issues on stock prices and returns so as to
understand the possible response of investors to seasonal issues.

D, E, W K, J. K.  2016.  THE EFFECT OF GENERAL ELECTIONS ON STOCK RETURNS AT THE NAIROBI SECURITIES EXCHANGE. European Scientific Journal. 11(28):1857-7881. AbstractEffects_of_general_elections_on_stock_returns_at_the_nairobi_securities_exchange.pdf

The performance of the financial markets is significantly impacted by
the political environment during eneral ellections. This paper focussed on the
effect of general ellections on the stock retuns at the Nairobi Securities
exchange. Emperical results have given inconsistent results on whether
general election events negatively of positively impact the stock return. The
study adopted event study methodology and analysed secondary data
collected from the NSE around the 1997, 2002, 2007 and 2013 general
election dates in Kenya. The study found that market reaction to elections is
highly negative or positive depending on the volatility of the election
environment. Analysis of the cumulative abnormal returns (CAR) found that
the 2002 and 2013 general elections were insignificant, while the CAR
around the 1997 and 2007 general election events were found to be
significant at 5% level of significance. The study, thus recommends that
stock market, investors and other stakeholders not to overlook electioneering
events, and to implement policies that will cusion the security market against
political risks during general elections to enhance investor confidence

D., E.  2016.  EFFECT OF NATIONAL ANNUAL BUDGET READING ON EQUITY RETURNS AT THE NAIROBI SECURITIES EXCHANGE. DBA Africa Management Review. 6(1):107-118. AbstractEffect_of_national_annual_budget_reading_on_equity_returns_at_the_nairobi_securities_exchange1.pdf

The objective of this study was to investigate the effect of budget reading on equity returns at
Nairobi Securities Exchange. The study adopts descripting staristics design using event model
methodology to establish the correlation between the variables. Secondary data on stock
performance around the 2009, 2010, 2011, 2012 and 2013 budget reading dates was collected
from the NSE database. Data analysis was done using SPSS program to generate the descriptive
statistics, and the study finds that the reading of national budget has significant effect on the
stock returns at NSE during the event period, depending on information content. Analysis of the
AAR, CAR and SCAR of the companies in the NSE-20 share index, during the 5 day event
period before and after the annual national budget reading finds that other than year 2010 that
records no statistical significance of SCAR, the SCAR p value for 2009, 2011, 2012 and 2013
are all less than p = 0.05, suggesting that the market returns for four years deviated significantly
from their means during the event period of budget readings. Therefore, the study recommends
that investors, investment banks, listed companies and the capital markets authority to consider
the effect of national budget reading on stock returns, to formulate policies that can cussion
investors against the effects of budget reading.

2015

Elly, D, Kaijage ES.  2015.  DEMAND SIDE FACTORS AND ACCESS TO EXTERNAL FINANCE BY SMALL AND MEDIUM MANUFACTURING ENTERPRISES IN NAIROBI, KENYA, 28- 29TH -5-2015. 15TH INTERNATIONAL CONFERENCE ON AFRICAN ENTREPRENEURSHIP AND SMALL BUSINESSES DEVELOPMENT. , WHITE SANDS HOTEL, DAR ES SALAAM, TANZANIA. Abstractdemand_side_factors_and_access_to_external_finance_by_small_and_medium_manufacturing_enterprises_in_nairobi_kenya-2.pdf

This study investigates how demand-side factors affect access to external finance by small and medium manufacturing enterprises (SMMEs) in Nairobi, Kenya. The demand-side factors considered in the study are firm characteristics, financial management practices and entrepreneur characteristics. The study employs an exploratory survey design utilizing quantitative methods in data collection and analysis. Data is analyzed using descriptive and inferential statistics. Logistic regression is used to test the relationship between demand-side factors and access to external finance because of the dichotomous nature of the dependent variable. The findings of the study show that some of the demand-side factors significantly influence access to external finance. These factors include entrepreneur’s networks, ethnic orientation, firm growth and earnings volatility. The study recommends further probing of the role of good financial management practices such as preparation and usage of financial information on access to external finance in diverse settings and industries. It is also important for entrepreneurs and providers of the finances to establish and support sustainable networks that guarantee enterprise growth. Though ethnic orientation influence access to external finance, policy efforts should be put in place to ensure there is efficiency in the market for external financing and certain entrepreneurs are not disenfranchised on the basis of their ethnic background. As firm growth also influences access to finance, managers of the SMMEs should endeavor to attain steady and predictable earnings growth with minimal deviations. Such efforts would help minimize financial constraints caused when external funds are inaccessible.

Key Words: Demand side factors, Small and medium manufacturing enterprises

2014

Elly, D, Kaijage ES.  2014.  FINANCIAL INTEGRATION RELATIONSHIPS AND LINKAGES IN EAST AFRICAN COMMUNITY (EAC) EQUITY MARKETS, 17 October. ORSEA. , lower Kabete Abstractfinancial_integration_relationships_and_linkages_in_east.pdf

This paper investigates financial integration and linkage relationships amongst equity
markets in East Africa Community over time by determining the speed and levels of
integration using monthly market return data for the period 2007 to 2013. The study also
examines the short run and long run relationships amongst the markets. The study was
motivated by the ongoing plans of establishment of the East Africa Monetary Union
(EAMU) which will be characterized by mobility of labor and capital as factors of
production across the member states.
Using beta and sigma convergence measures, the study notes that financial integration
has not deepened in the EAC over the years though there are trends towards full
integration. Correlation analysis suggests strong significant relationships amongst EAC
equity market returns. Johansen Cointegration tests suggest existence of three stochastic
trends in the equity markets. Vector auto regression analysis and impulse response
analysis suggest linkages amongst the markets hinging on the NSE and mean reversion in
all the equity markets. The study findings suggest that the EAC equity markets are weak
form efficient and there are arbitraging opportunities across the equity markets. The
responses to the shocks in any of the markets are found to be dependent on the
relationships between the markets.
From the study findings, it is inferred that the roadmap to EAMU should be fast tracked
by facilitating efficiency in the EAC markets where rates of return are market
determined. Policy initiatives should be put in place to eliminate arbitrage opportunities
across the markets and to encourage capital mobility through the equity markets. To
support integration, there should be academic studies on the existence of home bias in the
EAC equity market segments.
Key Words: East Africa Community (EAC), East Africa Monetary Union (EAMU), Dar
es Salaam Stock Exchange (DSE), Financial Integration, Nairobi Securities Exchange
(NSE), Uganda stock Exchange (USE).

Elly, D.  2014.  EXECUTIVE COMPENSATION AND FIRM FINANCIAL PERFORMANCE: A CRITICAL LITERATURE REVIEW. : University of Nairobi Abstract

There has been growing academic interest in the compensation of senior management in corporate enterprises. This interest stems from a concern about the motivation of management as well as concerns about equity and fairness coupled with the importance of corporate governance in enterprises. Shareholders as principals in entities desire maximization of stock returns for a given level of risk and they naturally wish that their firms design compensation systems that motivate senior executives as their agents to pursue policies that meet the principal objective of shareholder wealth maximization. This desk review of relevant theoretical and empirical literature investigates whether the executive compensation – performance link meets an optimality test ex –ante or ex – post under the agency based models as well as other alternative paradigms that explain managerial actions. From the review findings, a confusing debate rages among academics about the relationship between executive compensation and firm financial performance. This confusion manifests itself in a number of ways: in the range of empirical specifications for pay to performance regressions in the literature; in the wide discrepancy in estimates of pay performance sensitivities and in controversy over the appropriate level of executive holdings of stock and stock options. Differences in research methodology explain some of the inconsistent conclusions notwithstanding that there is even a lack of consensus among some studies that use identical or very similar research designs. Foremost, the measurement of firm success is in intself controversial regarding adoption of performance measures. Also controversial is treatment of the components of compensation. The diverse set of disciplines involved in the study area and the wide variety of methods used to investigate the main questions complicates the way to consensus especially on incorporation of organizational contextual settings and other contingency factors for executive compensation.
Research gaps emerging in the literature review include; wide variations of pay performance sensitivities derived within agency models, minimal evaluation of explanatory values of alternative paradigms to the agency models, undefined relationships between pay performance sensitivity and the performance metric applied, undefined relationship between executive compensation components and past and future organizational performance levels, inexplained sensitivity of the pay performance link to organizational contextual effects of ownership and internationalization, unspecified possibility of dual causality between executive compensation and firm performance and the information content of executive compensation plan adopted by a public enterprise.
The study recommends future research effort for bridging the knowledge gaps using alternative paradigms while adressing the methodological issues of empirical specifications, causality, fixed-effects, first-differencing, and instrumental variables. On the empirical specifications, the studies need to reconsider the causality relationships, operationalization of research variables, use of panel data and incorporation of control variables like demographic characteristics, corporate governance mechanisms, regulation, firm ownership and globalization.

Kaijage, ES, Elly D.  2014.  EFFECT OF CORPORATE CHARACTERISTICS ON CAPITAL STRUCTURE DECISIONS OF SMES: A CASE OF DTMs IN KENYA, 30 May 2014. THE 14TH INTERNATIONAL CONFERENCE ON AFRICAN BUSINESS AND SMALL BUSINESS (ICAESB). , THE UNIVERSITY OF DAR ES SALAAM BUSINESS SCHOOL (UDBS) Abstracteffect_of_corporate_characteristics_on_capital_structure_decisions_of_smes.pdf

The choice between debt and equity for a business firm has implications on the value of a firm as well as strategic importance for corporate managers. Previous studies have addressed the issue of capital structure decisions from the point of view of large firms. The capital structure of Small and Medium - sized Enterprises (SMEs) has become a research topic only recently despite the fact that SMEs play a very crucial role in fostering growth and employment in many countries. Some research studies have investigated the relationship between capital structure mix as an independent variable and specific corporate characteristics as dependent variables. This paper reverses this order by investigating the influence of various corporate characteristics on the capital structure of deposit taking microfinance institutions (DTMs) in Kenya. DTMs are a special group of SMEs in Kenya, which create money through deposit mobilization and lending and are regulated by the Central Bank of Kenya (CBK). Using secondary data from financial reports of 7 out of 9 Licensed DTMs in Kenya for the period 2008 to 2012, this study has applied ordinary least squares (OLS) fixed - effect regression models to estimate the influence of firm corporate characteristics on capital structure measure of debt equity ratio. The corporate characteristics considered are: size, profitability, liquidity, growth, tangibility of assets and volatility of earnings. The study findings suggest that size and growth positively influence, in a significant way, the capital structure of DTMs in Kenya. Furthermore, liquidity, profitability, and tangibility of assets have been found to be negatively influencing the capital structure of the DTMs. These findings generally concur with the predictions of the pecking order theory and the signaling effects of capital structure decisions of firms.

Key Words: Deposit taking microfinance institutions (DTMs), Microfinance institutions (MFIs), Small and Medium Enterprises (SMEs), Capital Structure and Corporate characteristics.

2013

Elly, OD, Ojung’a AS.  2013.  THE EFFECT OF EXCHANGE RATE VOLATILITY ON FOREIGN DIRECT INVESTMENTS IN KENYA. International Journal of Education and Research. Vol. 1 September 2013(9) Abstractthe_effect_of_exchange_rate_volatility_on_foreign_direct.pdf

Kenya like most developing countries has had a deficiency of investment capital which can
negatively affect economic activities. Due to the decline in official development assistance (ODA)
in the 1990s, most of the developing countries’ governments have put in efforts to attract foreign
direct investment which not only creates employment opportunities but also contributes to
economic growth and development. This study therefore investigates the effect of exchange rate
volatility on foreign direct investments (FDI) in Kenya by examining the degree of relationship
between the exchange rate volatility and FDI inflows.
Secondary annual data of both FDI inflows and Exchange rate fluctuation variables for the periods
1981 to 2010 were collected and analyzed in the study. This period is sampled since it captures
three exchange rates regime namely fixed rates regimes, pegged rates regimes and finally floating
rates regimes. The data for real effective exchange rates and FDI are obtained from the IMF and
World Bank data bases on their websites and from the Central Bank of Kenya (CBK).
The findings of the study indicate that the correlation between the two variables is 0.318 implying a
positive correlation which is however weak. The study recommends a more controlled
macroeconomic environment in order to control the fluctuations of the macro economic variables
hence attract more foreign investors in order to increase the FDI inflows into the country. It further
considers future investigation on the contributions of other variables that affect FDI.
Key Words: Exchange rate fluctuations, Foreign direct investments (FDI).

Elly, OD, Hellen KW.  2013.  Relationship between inflation and dividend payout for companies listed at the Nairobi Securities Exchange. International Journal of Education and Research. 1(6) Abstractrelationship_between_inflation_and_dividend_payout_for_companies_listed_at_the_nse_2013.pdf

Earlier studies conducted have a mixed opinion on the effect of inflation on dividend payout. Due to the nominal increase in the volumes of money, which result from the increase in inflation, at least for a short run, some studies have concluded that inflation has a positive effect on dividend payout. However, in the long run, studies in general seem to show that the inflation rate and stock returns are negatively related. This study, which considers a sample of all the firms that consistently paid dividend between the year 2002 to 2011 and were listed at the Nairobi Security Exchange showed that, inflation rate has no impact on the dividend
payout. However, other variables considered, that is, the spot Dollar exchange rate to Kenya Shillings,
the Volumes of Money Supply and the T-Bill rate (91 day rate) show mixed results. The study reveals that, the exchange rate and the T-Bill rate have a positive correlation with dividend payout, while volume of money supplied has no impact on the dividend payout.
Key Words: Nairobi Securities Exchange (NSE), Dividend Payout, Inflation, Exchange Rate, Money Supply, T-Bill rate.

OCHIENG’, ELLYDUNCAN.  2013.  EXECUTIVE COMPENSATION AND FIRM FINANCIAL PERFORMANCE: A CRITICAL LITERATURE REVIEW. , Nairobi: University of Nairobi Abstractexecutive_compensation_and_firm_financial_performance_-_a_critical_literature_review.pdf

There has been growing academic interest in the compensation of senior management in corporate enterprises. This interest stems from a concern about the motivation of management as well as concerns about equity and fairness coupled with the importance of corporate governance in enterprises. Shareholders as principals in entities desire maximization of stock returns for a given level of risk and they naturally wish that their firms design compensation systems that motivate senior executives as their agents to pursue policies that meet the principal objective of shareholder wealth maximization.

This desk review of relevant theoretical and empirical literature investigates whether the executive compensation – performance link meets an optimality test ex –ante or ex – post under the agency based models as well as other alternative paradigms that explain managerial actions. From the review findings, a confusing debate rages among academics about the relationship between executive compensation and firm financial performance. This confusion manifests itself in a number of ways: in the range of empirical specifications for pay to performance regressions in the literature; in the wide discrepancy in estimates of pay performance sensitivities and in controversy over the appropriate level of executive holdings of stock and stock options.

Differences in research methodology explain some of the inconsistent conclusions notwithstanding that there is even a lack of consensus among some studies that use identical or very similar research designs. Foremost, the measurement of firm success is in intself controversial regarding adoption of performance measures. Also controversial is treatment of the components of compensation. The diverse set of disciplines involved in the study area and the wide variety of methods used to investigate the main questions complicates the way to consensus especially on incorporation of organizational contextual settings and other contingency factors for executive compensation.

Research gaps emerging in the literature review include; wide variations of pay performance sensitivities derived within agency models, minimal evaluation of explanatory values of alternative paradigms to the agency models, undefined relationships between pay performance sensitivity and the performance metric applied, undefined relationship between executive compensation components and past and future organizational performance levels, inexplained sensitivity of the pay performance link to organizational contextual effects of ownership and internationalization, unspecified possibility of dual causality between executive compensation and firm performance and the information content of executive compensation plan adopted by a public enterprise.

The study recommends future research effort for bridging the knowledge gaps using alternative paradigms while adressing the methodological issues of empirical specifications, causality, fixed-effects, first-differencing, and instrumental variables. On the empirical specifications, the studies need to reconsider the causality relationships, operationalization of research variables, use of panel data and incorporation of control variables like demographic characteristics, corporate governance mechanisms, regulation, firm ownership and globalization.

2012

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