Stock Market Liquidity and Financial Distress Likelihood Among Listed Firms in Nairobi Securities Exchange, Kenya

Authors

  • Naomi Koske Department of Accounting and Finance, School of Business and Economics, Moi University, Kenya
  • Joel Kiplagat Tuwei Department of Accounting and Finance, School of Business and Economics, Moi University, Kenya
  • Andrew Kimutai Kimwolo Department of Management Science and Entrepreneurship, School of Business and Economics, Moi University, Kenya

Keywords:

Financial Distress Likelihood, Stock Market Liquidity, Listed Firms

Abstract

Our study examines whether there’s a relationship between stock market liquidity and the likelihood of financial distress among listed firms in Kenya. This study was grounded on feedback theory. The study employed panel analysis for a period covering ten years from 2006-2015. The target population comprised all 64 listed firms in Nairobi Securities Exchange. Secondary firm-level panel data was gathered from year-end financial reports for the period 2006-2015. Standard multiple regression analysis was used to analyze and test the hypotheses. The study found a negative and significant effect of stock market liquidity (β=-1.842; p<0.05) on likelihood of financial distress. This finding revealed that stock market liquidity plays an important role in enabling firms to be financially stable and reduces chances of becoming financially distressed. This study recommends that the firms should take keen scrutiny of their financial structures. Further research should focus on other possible market structures that can be used to lower and avoid likelihood of financial distress.

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Published

2019-12-30

How to Cite

Koske, N., Tuwei, J. K. ., & Kimwolo, A. K. . (2019). Stock Market Liquidity and Financial Distress Likelihood Among Listed Firms in Nairobi Securities Exchange, Kenya. Journal of Economics, Finance and Accounting Studies , 1(1), 28-38. Retrieved from https://al-kindipublisher.com/index.php/jefas/article/view/197