Effects of Macro Economic Forces on Perfomance of Construction and Allied Companies Listed at the Nairobi Securities Exchange (2004 To 2013)

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dc.contributor.author Makori, Mariam
dc.date.accessioned 2015-11-12T12:55:05Z
dc.date.available 2015-11-12T12:55:05Z
dc.date.issued 2015
dc.identifier.uri http://erepo.usiu.ac.ke/11732/1485
dc.description A Project Report by Mariam Makori, Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters of Business Administration (MBA) en_US
dc.description.abstract The purpose of the study was to determine the influence of macroeconomic forces on performance of construction and allied companies listed at the NSE between the years 2004 to 2013. The study specifically sought to investigate the: effect of GDP growth on performance of construction and allied enterprises in Kenya, effect of exchange rate volatility on performance of construction and allied enterprises in Kenya and effect of inflation on performance of construction and allied enterprises in Kenya. This study was guided by the explanatory research design. Explanatory research implies that the research in question is intended to explain, rather than simply to describe, the phenomena studied. The population relevant to the study was five construction and allied companies listed at the NSE. Secondary data on GDP growth, inflation rates and exchange rates volatility was sourced from the Central Bank of Kenya and the World Bank database. Annual individual company financial performance measures of return on assets (ROA) and Tobin’s Q ratio was sourced from the individual five companies’ financial reports. The collected data was analyzed using descriptive and inferential statistics to test the significance and direction of relationships between the study variables. Specifically, Correlation analyses show the association between study variables and multiple regression analysis shows the strength, directions and significance of the relationships. Correlation analyses establish statistically significant weak negative associations between; exchange rate volatility and GDP growth rate and GDP growth rate and Inflation rate. There is also a statistically significant weak positive association between exchange rate volatility and Inflation rate. Regression analysis results suggest that the relationships between performance proxied by ROA and the predictor macroeconomic variables are not statistically significant. Multiple regression analyses establish weak positive relationships between performance proxied by (ROA) and GDP growth rate, inflation rate and exchange rate volatility. The study findings suggest a weak positive none statistically significant relationship between performance measured by firm’s Tobin’s Q ratio and the GDP growth rate. This confirms that when there is economic growth in a country, firm performance is equally boosted with good returns to the capital owners. The study establishes a weak positive relationship between performance proxied by the Tobins Q ratio and Inflation rate. Though high levels of inflation are not suitable for overall economic performance, the beneficiaries of general increase in price levels of commodities are the producers which also include the manufacturers. Commodity price increases improves the profitability of the manufacturers. The study findings imply that there is a weak negative relationship between firm performance measured as Tobin’s Q ratio and Exchange rate volatility experienced in the economy. Since the manufacturers often import their inputs before processing, exchange rate risks may be detrimental to their performance as they have to incur transaction exposure losses or costs to manage such exposures. In efforts to improve the overall firm performance and subsequently economic performance, Government should put in place efforts for improved and sustainable economic growth which enhances employment creation and stimulates the general demand for manufactured goods. Though, inflation characterized by sustainable increase in price levels is conducive for profit maximization, government policy should be focused on maintaining inflation at reasonable levels that do not disturb the optimal levels of domestic commodities consumption by encouraging importation of cheaper commodities and subsequently stifle domestic manufacturing. Since frequent fluctuations in exchange rates negatively affect manufacturing firm performance on account of their foreign currency denominated transactions, firms should introduce contractual and non-contractual techniques for managing their exposures. Government policy can also be directed towards limiting exchange rate fluctuations through government fiscal and monetary policy intervention mechanisms. The study recommends further research incorporating other macroeconomic forces that include money supply, interest rates, balance of payments and government fiscal policy. The studies with lagged predictor variables to account for the effect of time should control for the influence of hedging alternatives on firm performance as well as other firm specific attributes. en_US
dc.publisher United States International University - Africa en_US
dc.subject Macro Economic Forces en_US
dc.subject Perfomance en_US
dc.subject Construction en_US
dc.subject Allied Companies Listed en_US
dc.subject Nairobi Securities Exchange en_US
dc.title Effects of Macro Economic Forces on Perfomance of Construction and Allied Companies Listed at the Nairobi Securities Exchange (2004 To 2013) en_US
dc.type Thesis en_US

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