APPLICABILITY OF PIOTROSKI F-SCORE MODEL IN PREDICTING FINANCIAL DISTRESS OF LISTED COMPANIES AT THE NAIROBI SECURITIES EXCHANGE 20 SHARE INDEX, KENYA

Abstract

Financial distress prospect is a key bother to the executives and business partners. It is usually not a selective event and may attack both big and small organizations alike. With the importance of securing financial health of listed companies in Kenya, it is vital to anticipate the likelihood of fiscal distress beforehand and hence the need for prediction and more so applying a reliable model in the prediction. This study focused on showing the utilization of Piotroski F-score framework in forecasting the economic or monetary depression among publicly quoted organizations particularly the NSE 20 Price Index firms for the period of two financial years (2016 and 2017). Descriptive survey approach was employed targeting the NSE 20 Price Index firms which were mainly in service and commercial sector to investigate how elements used by Piotroski can help in determining the financial status of a company. The entire population of 20 firms was involved since this target population is manageable. Data was extracted from secondary sources for a period of the two financial years. The information gathered was dissected and synthesized by utilizing illustrative and inferential measurements through use of SPSS Version 22 computer programme. The results revealed that the 20-Share Index firms placed steady outcomes as far as resources were concerned. Also, liquidity, leverage and source of assets were found as key determinants of fiscal strains among NSE recorded firms. The connection between fiscal strains and liquidity and leverage were found to be emphatically related with fiscal strains suggesting that when liquidity and leverage go up, the fiscal strains of firms at NSE also grow. The results inferred that the NSE 20- Share Index firms have moderately low fiscal strains. The study recommended that managers of NSE listed firms ensure that the objectives of a company are adhered to from the initial stage of development lifecycle of a company in order to gain a positive reputation from various stakeholders and ensure that the company focuses on strategically planned projects that will propagate external funding hence facilitating financial performance leading to profitability.