Strategic challenges faced by corporate firms when going public in Kenya
Date
2009-05
Authors
Nyaga, Patrick
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The objectives of the study were to establish the challenges faced by firms issuing
public offering in Kenya; to determine strategic implications ofthese challenges; and to
establish how corporate firms in Kenya respond to these challenges. Descriptive survey
was adopted and semi - structured questionnaires were administered by the researcher
as well as discussions with the respondents. The study was a census of all companies
which have issued initial public offering in the last 13 years. Data was analysed using
descriptive and advanced statistics such as frequencies, percentages, mean scores and
standard deviation.
Government privatization policy was the main driving factor for issuing initial public
offering in Kenya and the other main reason for going public by firms being the need
raise capital for growth. The study established younger firms spent less time preparing
for IPO as compared to older and more established firms which spent more time
making preparations before commencement of IPO issue. It was established that initial
public offering led to more than 49 percent ownership surrender to investors by 38
percent of the firms. Retail investors were the major beneficiaries ofIPO's in Kenya as
was demonstrated by the proportion ofshares reserved for them.
The major strategic issues for issuing firm were diversion of management time, offer
timing, approval by regulators, IPO transactions processing, offer price determination
and the refund process. From findings, it was concluded that successful execution of
IPO strategy require a lean and focused team; scaling down of activities; timely,
complete and adequate information; adequate competent and facilitated employees;
publicity; and use of state - of- the - art technology. Following findings of the study,
it was recommended that:
> Superior technology is the bedrock to success in emerging economies such as
Kenya. There is need for technology upgrading to partly reduce diversion of
management time by adopting video conferencing and accurate market
forecasting and real time processing of the IPO transactions including refunds.
> Issuing firms should develop strategies for addressing political risks such as
manipulation of IPa issue by single or group of influential politicians to the
detriment ofordinary investors.
> Results showed that firms did not have response mechanisms to price shocks.
There is need for issuing firms to hedge investors to losses resulting price
shocks in the secondary market.
> Future studies should investigate the impact of lockup agreement on share price
performance and investor confidence in Kenya.
Description
A dissertation submitted in partial Fulfillment of the Degree of Master in Business Administration (MBA)
Keywords
Strategic management, Business, Kenya, Corporates