A cross-sectional analysis of the factors influencing company listings on the Nairobi Securities Exchange
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Abstract
This was a cross-sectional study of the specific factors influencing company listings based on the Nairobi Securities Exchange (NSE). The study sought to establish what factors affect those companies which have met the threshold listing requirements but have not opted to publicly list on the exchange. Non listed companies were used as suggested by prior research to determine what has hindered their being listed as well as what would motivate them to consider listing on the stock market with regard to the benefits that accrue to listing. Data was collected based on two sample groups of companies: listed and non-listed using the companies’ prospectuses of the listed companies and a questionnaire for the non-listed companies. Basic descriptive statistics were used to describe the empirical data, inferential statistics and multiple regression analyses were used for analysis. From among the listed companies the most influential factor considered in the listing decision was the political environment which was characterised by a change in political regime. The effect cited by the respondents was the (de) regulation of the industries in which the companies were operating in thus making expansion possible and consequently use of the capital market to raise funds. Additional factors which had not been considered in the literature which emerged among these companies were the market automation which considered to have made the market more efficient and thus more attractive. With reference to the non-listed companies, the most influential factor was the listing requirements considered under the legal and regulatory framework. The respondents expressed the view that these were too stringent. The other relatively more influential factor was the political environment which was also highly considered by the respondents. However, there were four issues that emerged that had been previously covered scantily. These factors were determined as the more influential factors by the respondents with reference to their not being listed. The emerging issues were company or organization structure, public scrutiny, dilution of ownership and a lack of necessity to raise long term funds. Ironically, the most motivating benefit was access to a wide capital base, drawing the conclusion that when a company is in need of heavy capital financing they would highly consider use of the capital market. Despite these benefits the study found that there is a need to lower listing and maintenance costs and for the NSE to broaden the scope of their products.
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A thesis submitted to Strathmore University in partial fulfillment to the requirements of the award of Master of Commerce (MCOM).
Full text thesis.
This was a cross-sectional study of the specific factors influencing company listings based on the Nairobi Securities Exchange (NSE). The study sought to establish what factors affect those companies which have met the threshold listing requirements but have not opted to publicly list on the exchange. Non listed companies were used as suggested by prior research to determine what has hindered their being listed as well as what would motivate them to consider listing on the stock market with regard to the benefits that accrue to listing. Data was collected based on two sample groups of companies: listed and non-listed using the companies’ prospectuses of the listed companies and a questionnaire for the non-listed companies. Basic descriptive statistics were used to describe the empirical data, inferential statistics and multiple regression analyses were used for analysis. From among the listed companies the most influential factor considered in the listing decision was the political environment which was characterised by a change in political regime. The effect cited by the respondents was the (de) regulation of the industries in which the companies were operating in thus making expansion possible and consequently use of the capital market to raise funds. Additional factors which had not been considered in the literature which emerged among these companies were the market automation which considered to have made the market more efficient and thus more attractive. With reference to the non-listed companies, the most influential factor was the listing requirements considered under the legal and regulatory framework. The respondents expressed the view that these were too stringent. The other relatively more influential factor was the political environment which was also highly considered by the respondents. However, there were four issues that emerged that had been previously covered scantily. These factors were determined as the more influential factors by the respondents with reference to their not being listed. The emerging issues were company or organization structure, public scrutiny, dilution of ownership and a lack of necessity to raise long term funds. Ironically, the most motivating benefit was access to a wide capital base, drawing the conclusion that when a company is in need of heavy capital financing they would highly consider use of the capital market. Despite these benefits the study found that there is a need to lower listing and maintenance costs and for the NSE to broaden the scope of their products.
This was a cross-sectional study of the specific factors influencing company listings based on the Nairobi Securities Exchange (NSE). The study sought to establish what factors affect those companies which have met the threshold listing requirements but have not opted to publicly list on the exchange. Non listed companies were used as suggested by prior research to determine what has hindered their being listed as well as what would motivate them to consider listing on the stock market with regard to the benefits that accrue to listing. Data was collected based on two sample groups of companies: listed and non-listed using the companies’ prospectuses of the listed companies and a questionnaire for the non-listed companies. Basic descriptive statistics were used to describe the empirical data, inferential statistics and multiple regression analyses were used for analysis. From among the listed companies the most influential factor considered in the listing decision was the political environment which was characterised by a change in political regime. The effect cited by the respondents was the (de) regulation of the industries in which the companies were operating in thus making expansion possible and consequently use of the capital market to raise funds. Additional factors which had not been considered in the literature which emerged among these companies were the market automation which considered to have made the market more efficient and thus more attractive. With reference to the non-listed companies, the most influential factor was the listing requirements considered under the legal and regulatory framework. The respondents expressed the view that these were too stringent. The other relatively more influential factor was the political environment which was also highly considered by the respondents. However, there were four issues that emerged that had been previously covered scantily. These factors were determined as the more influential factors by the respondents with reference to their not being listed. The emerging issues were company or organization structure, public scrutiny, dilution of ownership and a lack of necessity to raise long term funds. Ironically, the most motivating benefit was access to a wide capital base, drawing the conclusion that when a company is in need of heavy capital financing they would highly consider use of the capital market. Despite these benefits the study found that there is a need to lower listing and maintenance costs and for the NSE to broaden the scope of their products.
Keywords
Nairobi securities exchange, NSE, Listed companies