Does Organizational Characteristics Significantly Moderate The Relationship Between Market Information Risk And Price Discovery For Stocks Listed at the Nairobi Securities Exchange?

Abstract

The aim of the study was to determine the moderating effect of organizational characteristics on the relationship between market information risk and price discovery for stocks listed at the Nairobi Securities Exchange. Organizational characteristics may dictate the amount of information available in the market place and this has an impact on market players’ level of participation and eventually price discovery through generated trading activity. The results therefore supported the sub hypothesis that ownership concentration has a significant moderating influence on the relationship between market information risk and price discovery for stocks listed at the Nairobi securities exchange. The value of the interaction term had a significant influence thus confirming a moderation effect of ownership concentration. The value of the interaction term between market information risk and stock return volatility was found to be significant and supported the hypothesis that stock return volatility has a significant moderating influence. The value of the interaction term based on the composite variable had a significant influence and confirmed moderation effect of Organizational characteristics and this leads to rejection of the null the hypothesis that Organizational characteristics has a no significant moderating influence. The results show that organizational characteristics are significant in moderating market information risk and price discovery relationship. Market microstructure frictions play a central role in shaping the platform for influencing behaviour of participants and price evolution. The findings of this study are expected to guide managerial practitioners in the NSE firms to appreciate the integration of the organizational characteristics in the face of a challenging economic environment. It is recommended that other market microstructure studies should be undertake using other measures of price discovery Information Share and Variance Ratio especially for cross listed stock.

Key Words: Market Microstructure, Organizational characteristics, stock Return Volatility, Ownership concentration, Market Information Risk, Price Discovery, Stocks Listed at NSE