Effect of Currency Depreciation on Share Prices of Listed Agricultural Firms in Kenya

Abstract

This paper sought to assess the effects of currency depreciation on share prices of listed Agricultural firms in Kenya in the recent past 2020- 2023. It adopted a descriptive correlational research design. The target population was all the six Agricultural companies listed at the NSE as of December 2023. Secondary data was collected from the Nairobi Securities Exchange and Central Bank for the period January 2020 and December 2023, data collected took a panel dimension thus a simple regression analysis was done to establish the extent of the relationship between variables. It is evident that the shilling has drastically depreciated against the dollar while stock prices exhibited a price increase.  The paper found out that a unit change in exchange rates leads to a change in stock prices by 0.094. This means that stock prices increase by 9.49%. Thus a weak positive relationship between exchange rates and stock prices therefore exchange rates alone cannot be used to explain stock price volatility. This paper findings informs investors, portfolio managers, regulators, listed companies, financial institutions, and other market players. portfolio managers are better when they increase their positions in equity stocks when they forecast a depreciation of the foreign currency and consequently dispose of shares in their portfolio if they predict an appreciation of the foreign currency. Additionally the government of Kenya should  also establish measures and policies to enhance the country’s agricultural exports as this will go a long way in improving the performance of its agricultural listed. Finally it recommends further studies on the topic since it considered only two variables; exchange rates and share prices over four years.