LIQUIDITY RISK AND STOCK PRICES OF LISTED AGRICULTURAL FIRMS AT THE NAIROBI SECURITIES EXCHANGE, KENYA
Keywords:
Liquidity Risk, Stock Prices, Profitability, Firm Size, Agricultural Firms, Nairobi Securities Exchange (NSE), Panel Regression, KenyaAbstract
Purpose of the Study: This study examined the effect of liquidity risk on the stock prices of agricultural firms listed at the Nairobi Securities Exchange (NSE), Kenya. It further investigated the mediating effect of profitability and the moderating role of firm size in explaining how liquidity risk influences stock price movements and firm market valuation.
Methodology: The study adopted a positivist philosophy and a longitudinal explanatory research design using panel data from seven agricultural firms listed at the NSE between 2015 and 2024. Secondary data were analyzed using descriptive statistics, correlation analysis, panel regression, mediation analysis, and hierarchical regression to test the study hypotheses.
Findings: The findings revealed that liquidity risk has a negative and statistically significant effect on stock prices of listed agricultural firms. An increase in liquidity risk significantly reduced stock prices, indicating that investors respond negatively to firms experiencing liquidity constraints. Profitability was found to partially mediate the relationship between liquidity risk and stock prices, implying that effective liquidity management enhances profitability, which subsequently improves market valuation. Firm size positively moderated the relationship between liquidity risk and stock prices, demonstrating that larger firms are better positioned to withstand liquidity shocks due to stronger financial capacity, diversified operations, and improved access to capital markets, thereby enhancing investor confidence, financial stability, and long-term shareholder value significantly.
Conclusion: The study concludes that liquidity risk is a significant determinant of stock prices among agricultural firms listed at the NSE. Profitability partially explains this relationship, while firm size strengthens firms' resilience to liquidity challenges. Strengthening liquidity management and improving profitability can enhance investor confidence, firm value, and long-term stock price performance.
DOI: https://doi.org/10.5281/zenodo.21641244
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Copyright (c) 2026 Lucy Wamugo Mwangi, Ephantus Mwangi Ireri, Beatrice Nyokabi Wanjiru, Abdullahi Yunis Guliye
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