CAPITAL ADEQUACY AND MARKET CAPITALIZATION OF MANUFACTURING FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE IN KENYA
CAPITAL ADEQUACY AND MARKET CAPITALIZATION OF MANUFACTURING FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE IN KENYA
Beatrice Wanjiru Kigwa - MBA Candidate, School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya
Dr. Kimani E. Maina (Ph.D) - Lecturer, School of Business and Entrepreneurship, Jomo-Kenyatta University of Agriculture and Technology (JKUAT), Kenya
Dr. Hesbon N. Otinga, (PhD), (CPA) - Lecturer, School of Business and Entrepreneurship, Jomo-Kenyatta University of Agriculture and Technology (JKUAT), Kenya
ABSTRACT
Kenyan firms listed in the Nairobi Securities Exchange (NSE) have in the past decade recorded mixed results in relation to shareholders value creation thus raising queries of their financial soundness. For instance, though there has been an upward trajectory of 20.84 percent in shareholders wealth measured as market capitalization in 2024 compared to 2023, 85 percent of this value was controlled by ten companies. Of the ten, only one, East Africa Breweries PLC is in the manufacturing sector. The research study aimed to determine the effect of capital adequacy on market capitalization of firms listed at the Nairobi securities exchange in Kenya. The study was guided by buffer capital theory. The study employed a descriptive design because it permitted the researcher to break down associations among a substantial number of factors in a study. The study targeted 8 listed manufacturing firms at the NSE. The sample size was 8 listed manufacturing firms listed at the NSE hence there was no sampling. Secondary data was collected for duration of 7 years (2018 to 2024) annually. In data analysis, both descriptive and inferential statistics were conducted. Descriptive statistics involved determining the mean, the standard deviation, skewness and kurtosis of each variable under study while inferential statistics involved both the correlation and regression analysis. STATA 15 was employed for the data analysis purposes. Regression results show that capital adequacy (β = 1.3284, p = 0.000) positively and significantly influence market capitalization. The study concluded that financial soundness significantly shapes market capitalization among listed manufacturing firms. Capital adequacy enhanced firm valuation. The study recommended that manufacturing firms strengthen their capital base through retained earnings, prudent dividend policies, and improved financial management practices.
