Open AccessTHE RELATIONSHIP BETWEEN INTRINSIC AND MARKET VALUES OF LISTED COMPANIES IN THE NAIROBI SECURITIES EXCHANGE
Author(s) -
Paul Wanjohi Kiranga,
James M. Ng’ang’a
Publication year - 2016
Publication title -
international journal of marketing strategies
Language(s) - English
Resource type - Journals
ISSN - 2790-3494
DOI - 10.47672/ijms.53
Subject(s) - intrinsic value (animal ethics) , bivariate analysis , value (mathematics) , variables , regression analysis , econometrics , market value , stock exchange , descriptive statistics , pearson product moment correlation coefficient , stock market , simple linear regression , linear regression , statistics , business , positive relationship , economics , actuarial science , accounting , mathematics , finance , psychology , philosophy , environmental ethics , social psychology , paleontology , horse , biology
Purpose: The aim of the study was to establish whether there exists any relationship between the intrinsic and market values of listed companies in the Nairobi Securities Exchange.Methodology: An explanatory research survey design was used to show how the study variables relate to each other. The target units of analysis for this study were all the sixty one (61) companies currently listed in the NSE thus the study used a census methodology to gather data. The study used secondary data from the financial statements of the companies listed in the NSE. The study used Statistical Package for Social Sciences (SPSS) to generate the descriptive statistics and also to generate inferential results. The simple linear regression model was used to measure the relationship between the independent variable (intrinsic value) and the dependent variable (market value) which is explained in the model.Results: The linear regression analysis used to demonstrate the relationship between the stock market value and the intrinsic value indicated that there exists a positive relationship between the two. The positive relationship of market value and intrinsic value is further confirmed by Pearson’s Bivariate correlation which means that an increase in unit change of intrinsic value of the company results to a unit change in market value of the company. ANOVA results of the study presented the model used to determine the relationship between market value and intrinsic value to be statistically significant.Unique contribution to theory, practice and policy: It is recommended that investors should consider the intrinsic value when making investment decisions, for instance they should be aware that high intrinsic values lead to high market values and low intrinsic values lead to low market values.