The Effects of Stock Exchange Market on Firms’ Performance in Tanzania

Abstract

Aims: Study examined effects of stock exchange Market on Firms’ Performance in Tanzania, focusing on key market variables potentially in influencing firm profitability. In the context of a developing financial sector, Tanzanian firms face challenges in leveraging stock exchange mechanisms for optimal performance, raising concerns about the actual impact of stock market dynamics on returns. The general objective of study was to examine how share price (SP) and credit risk management (CRM) affect the performance of listed companies, measured by return on equity (ROE). Study employed Efficient Market Hypothesis Model. Study Design: Study used explanatory research design. Methodology: Study used secondary panel data of 140 observation for a sample of 28 listed firms on Dar es Salaam Stock Exchange since 2020-2024. Data were analysed using panel regression models, fixed effects model recommended from Hausman test and other model diagnostics. Ethical considerations were observed using publicly available financial data. Results: Findings from fixed effects model revealed credit risk management has positive (β = 3.04E-16) significant at the 5% level (p = 0.0436). Significant effect, where share price also exhibited positive insignificant relationship (β = 2.26E-05), (p = 0.6648). Conclusion: It is recommended that firms strengthen their credit risk management practices by adopting modern risk assessment tools, enhancing internal control systems and ensuring adherence to sound financial policies. Regulators and market participants should also promote transparency and investor confidence to stabilize share prices and encourage long-term investments. Furthermore, firms should focus on improving financial management strategies and corporate governance to minimize risks and enhance sustainable growth in the Tanzanian stock market.