DOI: 10.36347/sjebm.2018.v05i11.001

Pages: 992-996

Market capitalization is important in projecting the size of an organization because it shows the organization’s value. Even firms with high growth potential with less sales may still have high market capitalization. Market capitalization activities including stock turnover, changes in stock prices, stock return observably are stock market behavioral factors that influence investor’s decision in particular firm. Whether these activities affect their Return on Equity when they invest is a research gap of interest. The main aim of the study therefore was to analyze effect of market capitalization on performance of the listed firms in Nairobi Securities Exchange. Specifically, the study analyzed the effect of stock turnover, changes in stock price and stock return on financial performance of the listed firms in Nairobi Securities Exchange. The study was based on Trading Cost Theory, Trading Quantity Theory, Efficient Market Hypothesis and Arbitrage Pricing Theory. The study adopted events study research design which tested variables the way they have behaved in time and space. The study targets 63 firms listed in different market segments of Nairobi Securities Exchange. The study collected secondary data from both the securities market and annual audited accounts reports covering 2007-2017. The study purposively took census of all the firms listed at the Nairobi Securities Exchange of which will not require sampling procedure.