EFFECT OF INFORMATION ADJUSTMENT TIME ON SHARE PRICES FOR FIRM’S LISTED ON THE NAIROBI SECURITY EXCHANGE

Abstract

Purpose: The purpose of this study was to establish the effect of information adjustment time on share prices for firm’s listed on the Nairobi Security Exchange.Methodology: The study was carried out using descriptive research design. The target population consisted all companies listed on the NSE, and had previously done a rights issue. Convenient sampling technique was used to identify firms that had rights issue in the period under study.  Secondary data was collected using a schedule developed by the researcher. Data analysis was done using events study methodology and regression modelling.Results: Based on the findings the study indicated that there was slow information adjustment as established by the lagged residuals of the residuals. Specifically, the effects of rights issue announcement persisted for 2 days and thus indicating a slow information adjustment.Unique contribution to theory, practice and policy: Based on the findings the study recommends that further studies to be done on the impact of bonus issues, IPOs, and the global economic crisis (2008-2009) on stock returns of companies listed at the NSE.