Foreign Investor Participation Reforms and Securities Market Performance in Kenya

Abstract

This study investigated the influence of foreign investor participation reforms (FIPRs) on securities market performance in Kenya. It employed an exploratory research design, collecting primary data from firms participating in the securities market and 238 respondents who actively participated in the Kenyan securities market. Data was analyzed using SPSS AMOS, employing principal component analysis and confirmatory factor analysis to evaluate the associations between latent variables. Structural equation modelling was undertaken to evaluate any inherent relationship between the study variables. The findings revealed a significant positive influence between FIPR and several key indicators. An increase in FIPRs incentivized foreign investors to purchase more listed securities. As a result, foreign investors are shifting towards online trading due to reforms, which reduce the need for physical travel. The inherent taxation rate adjustment within the reforms has successfully drawn in more foreign investors into the local market. Generally, the results reveal a significant relationship between foreign investor participation reforms and securities market performance in Kenya, demonstrating the influence of these reforms in shaping domestic securities market outcomes. Given that investors constitute sixty-five percent of trading at the Nairobi Securities Exchange, attempts to further increase market activity must consider a reform agenda aimed at attracting foreign investors into the market.