EFFECT OF FINANCIAL STATEMENTS INTERPRETATION KNOWLEDGE ON QUALITY RETAIL INVESTMENT DECISIONS AMONG BROKERAGE FIRMS TRADING AT THE NAIROBI SECURITIES EXCHANGE IN NAIROBI COUNTY

Abstract

Purpose of Study: This study examined the effect of financial statements interpretation knowledge on the quality of retail investment decisions among brokerage firms trading at the Nairobi Securities Exchange in Nairobi County. It sought to determine whether enhanced financial statement interpretation skills significantly improve the quality of investment decisions made by retail-facing brokerage professionals. Methodology: The study adopted an ex-post facto research design involving 20 licensed brokerage firms with a population of 714 employees. A stratified random sample of 257 respondents was selected. Data were collected using structured questionnaires and analyzed using descriptive statistics and binary logistic regression in SPSS version 25. Findings: Out of 257 questionnaires distributed, 203 were returned, representing a 79.0% response rate. Respondents demonstrated moderate-to-high financial statement interpretation skills, with the highest competency in calculating financial ratios and comparatively lower competence in balance sheet analysis. Binary logistic regression revealed that financial statement interpretation had a positive and statistically significant effect on the quality of retail investment decisions (B = 2.454, p < 0.001). The odds ratio of 11.638 indicated that respondents with higher financial statement interpretation skills were substantially more likely to make quality investment decisions, confirming financial literacy as a critical predictor of sound retail investment behaviour. Conclusion: The study concludes that financial statement interpretation significantly enhances the quality of retail investment decisions among brokerage firms at the Nairobi Securities Exchange. Strengthening financial statement literacy through investor education and professional training can improve investment outcomes, reduce speculative decision-making, and promote informed participation in Kenya's capital markets.