Fundamental Anomalies and Firms Financial Distress; Evidence from Nairobi Securities Exchange, Kenya

Stock market broadly referred to as security exchange has gained so much interestsfrom various stakeholders around the world as they endow exceedingly to thegrowth of the world economy. Nairobi Securities Exchange, being an emergingstock market, this study therefore considered dividend yield anomaly, measured bydividend per share and price to earnings anomaly operationalized through earningsper share as the types of the fundamental anomalies. When there is fundamentalanomaly, firms tend to exhibit unhealthy financial position which is financialdistress, measured by Z-Score. The main objective of this study is to examine therelationship between fundamental anomalies and firms’ financial distress; evidencefrom Nairobi Securities Exchange, Kenya. This study adopts descriptive researchdesign and embraced secondary data from 2007 to 2017 from a target population of67 listed firms. It was found that there existed a relationship between fundamentalanomalies and firms’ financial distress. The study recommends that themanagement should put in place the right dividend policies, declaration or nondeclaration of dividends in the treatment of dividends. For policy makers andregulators, the recommendations will assist in restoring law and order and this willenable all the stakeholders to have confidence in Nairobi Securities Exchange.Keywords: Securities Exchange, Financial Distress, Fundamental Anomalies.