Factors Affecting Investment Decisions among Listed Firms in the Nairobi Securities Exchange

Abstract

Making effective and well-informed investment decisions cannot be emphasized enough because many reasons that are responsible for a firm’s achievement or failure are mostly attributed to the quality of decisions made. This is because when incorrect investment decisions are executed, they may be unchangeable, and if the firm continues and reverses them the outcomes may result in bigger losses. Therefore, this is the reason that this research sought to investigate factors that are affecting investment decisions among listed firms in the NSE. The researcher adopted the following factors: financial market information, investment risk, investor’s financial knowledge, and investment profitability to establish their effects on investment decision-making. The study adopted a descriptive research survey design and targeted 178 managers in all the listed firms listed on the NSE. For sampling, purposive and stratified sampling methods were employed in this study and a questionnaire was used as the research instrument to collect data. For analysis, descriptive and inferential statistics were used to analyze data collected from the field. The Statistical Package for Social Sciences (SPSS 23.0) helped to categorize results gathered and presented using tables. Effects of investment risk were found to be statistically significant, while financial market information also had a strong positive effect on investment decisions. Both investor’s financial knowledge and investment profitability had strong positive effects on investment decisions. From the results, it can be concluded that financial market information, investment risk, investment profitability, and investor’s financial knowledge (being the research variables) significantly affect investment decisions of firms listed on the NSE. It is recommended that for investment managers to succeed in their investment activities, they must cautiously examine those factors that affect investment decisions as identified in this study. Investor’s financial knowledge is particularly important for making better investment decisions because the ability to analyze and interpret the market indicators and economic variables is critical to a firm’s growth and success.