Stock Market Returns Volatility and Its Effect on the Growth of the Listed Companies in Kenya

In this paper, we analyze the effect of stock returns volatility on the growth of listed companies in Kenya under the Nairobi Securities Exchange 20 share index. We specified a dynamic panel data model used to capture this relationship. Using a panel of 228 observations from 19 listed companies over a period of 12 years from 2011 to 2022, we estimated both the difference and the system GMM. The findings show that stock returns volatility has a robust adverse effect on the growth rate of listed companies in Kenya. Further, the estimated model results support the theory that the growth of firms depends on their liquidity and retention ratios. These findings are critical to policymakers, investors, and companies as they strategize their effective portfolio allocations and interventions in the presence of a volatile market, as well as adding literature to the broader academic discourse.