EFFECT OF TAX REFUNDS ON STOCK MARKET PERFORMANCE OF LISTED COMMERCIAL BANKS IN NAIROBI SECURITIES EXCHANGE

Abstract

The global spread of the coronavirus across countries had a devastating effect on economies globally. Stock markets have suffered the blunt of the pandemic with a number of stock markets crashing even in developed economies. In response to the crisis using Keynesian model governments employed fiscal policies to address the challenges. The main aim of the study was to determine establish the effect of tax refunds on stock market performance of listed commercial banks in Kenya. This study was supported by the following theories: The Ability-To-Pay, Theory and efficient market theory. The study adopted descriptive design. The target population constituted 181 bank employees from 12 listed commercial banks in the Nairobi Securities Exchange. The sample size of the study was 178 bank employees comprising of managers and accountants who were selected through stratified-random sampling. The data was obtained from NSE for the period starting 25th March 2020 to 31st December 2020. The study applied closed-ended questionnaires to collected primary while secondary data was collected using data collection sheet from annual reports. Collected data was analyzed through descriptive statistics (mean and standard deviation) and inferential statistics (correlational and simple and multiple regression). Pilot test was conducted on non listed commercia banks in Kenya. Cronbach alpha was used to test reliability while face validity was used to test validity. The study found out that, tax refund had a strong positive and highly significant correlation with stock performance of listed commercial banks in Kenya N=130, r=.365(**), P=.000< 0.05. The study concluded that, tax refund had a strong, positive and highly significant correlation with stock performance of listed commercial banks in Kenya. The study recommended that, the government should consider giving firms incentives and other items like reducing the cost of energy and other necessary input materials instead of reducing corporation tax alone.