Factors Influencing Investment Decisions Among Young Entrepreneurs In CBD Nairobi County.

Abstract

The purpose of the study was aimed at investigating the factors influencing investment decisions among young entrepreneurs in CBD Nairobi County. This was necessitated by the fact that there seemed to be a problem in that rationality of some investment decisions and there was need to look at the factors that led to the decisions. The study thus specifically sought to determine the influence of financial literacy of individual youth investor on investment decisions; establish the influence of accounting information of individual investor on investment decisions; assess the influence of personal financial needs of individual investor on investment decisions; and to find out the influence of risk attitude of individual investor on investment decisions among young entrepreneurs in CBD Nairobi County. This study was based on the bounded Rationality, prospect/Loss-Aversion-Theory and the Over /Under Reacting Theory. The research study employed the descriptive Survey Design to target 909 young owned enterprises in Naiobi County. Simple random sampling was used to get 273 young entrepreneurs. Questionnaires were the data collection instruments. To establish reliability of research instruments, a pretest to test the reliability of instruments was done using the Cronbach’s coefficient alpha model whose figure was 0.716. To establish Validity of the instruments, the study supervisor examined the content of the instruments and advised the researcher on the content validity. Quantitative data was analyzed using descriptive statistics in form of percentages, frequencies standard deviations and means. Linear regression model and Pearson correlation analysis was also used to analyze data. Data was analyzed using descriptive statistics, regression and correlation and presented in tables. The results show: financial literacy (β=.383, t=4.968, p<0.000) accounting information(β=.293, t=3.593, p<0.004), personal needs, (β=.334, t=5.383, p<0.000), and risk attitude, (β=.362, t=4.129, p<0.000), had a significant influence on investment decision of young entrepreneurs in Nairobi CBD.The study therefore recommends: The young entrepreneurs should engage in financial literacy training courses so as to effectively make sound investment decisions. The young entrepreneurs should get meaningful access and an understanding, through access of accounting institutions, of accounting information and processes. The government in conjunction with the Capital Markets Authority and the NSE should review and initiate policies that would offer more access and complete rendering of accounting information to help in proper investment decisions. The young entrepreneurs should employ the proscribed rational logic which notes that when faced with a stock with unfavorable future expectations, individuals should sell the stock regardless of their current gain or loss condition. The young entrepreneurs should interrogate their attitudes to investment risk depending on factors such as personality, circumstances, educational attainment, level of financial knowledge and experience, and extent of financial product portfolio, income, wealth, age, marital status, gender and level of education. These will allow them to make informed choices as to the kind of investments that would ably suit them.