THE ACCRUAL EFFECT ANOMALIES AND VALUE INVESTING STRATEGIES OF FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE

Abstract

The study investigated the correlation between accrual effect anomalies and value investing strategies among firms listed on the Nairobi Securities Exchange. Further, it utilized descriptive statistics, diagnostic checks, correlation analysis, regression estimation, and interpretation to assess the impact of the relationship. The objective aimed to determine the impact of accrual effect anomalies on the performance of value investing strategies. The study revealed significant variations in total accruals (mean = -0.05) and current accruals (mean = -0.12) across various firms. The correlation analysis showed weak and statistically insignificant associations between accruals and value investing proxies like price-to-earnings, price-to-book, and dividend yield. The regression results confirmed the insignificance of the overall model, with both total and current accruals showing negligible coefficients and explaining only 0.01% of the variation in value strategies. The study reveals that accrual effect anomalies do not significantly impact value investing strategies in Kenya, unlike in developed economies where accrual mispricing persists. The study suggests that the use of accrual-based screens in NSE valuation strategies lacks predictive power, thereby reinforcing the reliability of conventional valuation measures.