EFFECTS OF TAX INCENTIVES ON PERFORMANCE OF LISTED FIRMS IN KENYA
Stock market performance at the Nairobi securities exchange has not improved despite tax incentives. It is not clear whether tax incentives are a gift or a motivator; sometimes stock market performance increases when tax incentives decrease and sometimes even decrease when more tax incentives are given. The study aims to determine the relationship between tax incentives and stock market performance. This study adopted a descriptive research design with a study population of 61 listed firms in NSE. A sample of 150 respondents was picked through stratified random sampling technique from 30 firms listed at NSE. The study used both primary and secondary data sources in gathering data for analysis. Data collection involved self-administration of questionnaires. The study used the Cronbach (Alpha – α) model to test the reliability of the data. Data was analyzed by use of Stata (version 13). Correlation analysis, multiple linear regression analysis, skewness and kurtosis tests were all conducted on the data collected. T-Test and ANOVA tests were computed to test hypothesis that tax incentives have little impact on NSE investments, performance and results to revenue losses by the government. The findings from this study reveal that tax incentives have an insignificant effect on NSE performance. It was therefore recommended inter alia that the governments should put in place predictable, clear tax laws and transparent tax administration that would provide conducive and favorable market opportunities to the investors rather than granting investment incentives. A study on the effects of tax incentives on performance of stock markets using time series models such the autoregressive conditional heteroscedasticity (ARCH) models, with its extension to generalized autoregressive conditional heteroscedasticity (GARCH) respectively which accommodate the dynamics of conditional heteroscedasticity should be conducted to determine if the results will be identical.