Abstract:
The introduction of REITs in the securities market was intended to broaden capital
markets, allowing them to be used to raise funds for affordable housing while also
serving as an alternative investment choice. However, since its introduction, Kenya’s
REITs market has experienced slow development. The performance of the listed REITs
has not been as expected since listing in the year 2015. Additionally, efforts by REIT
managers to issue more real estate securities have been slow. There is a lack of
information as to why this current situation exists. In addition, information is scant on
how investor sentiments, property diversification, and investor awareness may influence
the performance of REITs. Moreover, it is not clear how the market regulatory
framework may moderate the relationship between investor sentiments, property
diversification, investor awareness, and the performance of REITs in Kenya. Thus, the
main objective of this study was to examine how investor sentiments, property
diversification, and investor awareness influence the performance of REITs in Kenya.
Specifically, the study sought; to assess the influence of investor sentiments on the
performance of REITs, examine the influence of property diversification on the
performance of REITs, evaluate the influence of investor awareness on the performance
of REITs, and analyse the moderating effect of market regulatory framework on the
influence of predictor variables on the performance of REITs in Kenya. A predictive
correlational research design was employed. The target population comprised 202
respondents consisting of Fund Managers, Stock Brokers, Investment Banks and
Property Developers. A structured questionnaire was used to collect primary data, while
audited financial records for the years 2016-2020 provided secondary data. The
reliability and validity of the research instrument were ascertained through pre-testing,
Cronbach alpha, and factor analysis. To summarize the findings, descriptive statistics
were employed. Inferential statistics such as Structural Equation Modelling were used to
test the hypothesized relationships at a 5% significance level. SPSS and DEA software
was used for data analysis. The results are presented using tables and discussions.
Results show that there exists a positive significant influence of investor sentiments on
the performance of REITs. There exists a positive significant influence of property
diversification on the performance of REITs. Further, the influence of investor awareness
on the performance of REITs is positive but statistically insignificant. The findings also
revealed that the market regulatory framework does not significantly moderate the
influence of investor sentiments, property diversification investor awareness, and
performance of REITs in Kenya. The study concludes risk and return sentiments have
made REITs issuers shy away from issuing new such securities in the market. Further,
continued property-type location diversification will enhance the uptake of REITs by
investors. The study recommends that continuous engagement sessions between the
securities market regulatory authority, the REITs Association of Kenya, and investors
will enhance market confidence, thus lowering the risk-return sentiments. In addition,
REITs issuing firms should also ensure that there is clarity over the returns of the
underlying properties since this is likely to improve REITs' share returns by creating
certainty among investors.
