JEFMS Journal

ABSTRACT:

The universal objective of this study is to establish the relationship between size effect anomalies and financial distress of listed firms in Nairobi Securities Exchange (NSE), Kenya. Due to the size effect anomalies, firms experience financial distress. The study adopts descriptive research design and positivist research. It considered all listed firms in NSE which had been licensed by Capital Market Authority (CMA) as at 1st January 2017, totaling to 67 which constitutes the target population. The study considers secondary data which were extracted from the audited financial statements from individual firms from 2007 to 2017. This study will apply panel data model and in data analysis and presentation, the statistical software to be used is EView while the p-value will be applicable in hypothesis testing. The Z-Score, a multivariate approach was applied as the financial prediction model. The results were presented using tables. Size effect anomalies was established to have weak negative correlations with the financial distress. The size effect anomaly was statistically significant at five percent level of significance meaning that the null hypothesis failed to be accepted. The study’s recommendations will assist the management, investors, researchers, policy makers and regulators.

KEYWORDS:

financial distress, securities exchange, size effect anomalies

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