Mergers and Acquisitions Announcements and Stock Returns of Listed Firms at the Nairobi Securities Exchange, Kenya

Abstract : This study examined the effect of mergers and acquisitions announcements on stock returns among firms listed at the Nairobi Securities Exchange, Kenya. The study was anchored on Synergy Theory and adopted a positivist research philosophy, a descriptive research design and event study methodology. The broader study targeted all 60 firms listed at the Nairobi Securities Exchange and identified 127 corporate announcement events between 2014 and 2024. For the mergers and acquisitions component, 10 announcement events were analysed using a census approach. Secondary data on announcement dates and daily share prices were obtained from the Nairobi Securities Exchange. An event window of 15 trading days before and 15 trading days after each announcement was used. Actual returns, expected returns, abnormal returns (AR), cumulative abnormal returns (CAR), standardized abnormal returns and standardized cumulative abnormal returns were analysed, with significance assessed using one-sample t-tests at the 5% level. The findings showed limited market reaction before the announcements. On the first trading day after an M&A announcement, the average abnormal return increased to 0.1216 and was statistically significant, t (9) = 3.145, p = .020. Cumulative abnormal returns were positive and statistically significant from day +1 through day +7, with CAR reaching 0.1488 on day +1. The study therefore established that mergers and acquisitions announcements have a statistically significant positive effect on stock returns among firms listed at the Nairobi Securities Exchange. The study recommends clear and timely communication of the strategic rationale, expected synergies and anticipated benefits of M&A transactions to strengthen investor confidence and facilitate informed market responses.