Factors Affecting Demutualization of the Nairobi Securities Exchange

Abstract

The objective of this study was to determine the factors affecting demutualization of the Nairobi Securities Exchange. The study adopted a descriptive research design. The target population comprised of all 25 stakeholders at the NSE. This included: Capital Markets Authority (CMA), Central Depository Systems (CDS), Stock Brokerage firms, and mutual companies. Primary data was collected by use of a semi structured questionnaires with both open and closed ended questions. Data analysis was done using SPSS and Microsoft Excel to generate quantitative reports which were presented in the form of tabulations, percentages, mean and standard deviation. Multiple regression analysis between different variables related to demutualization of the NSE was also conducted. The study found out that factors that affect demutualization of the NSE include ownership structure, government policy and regulatory framework and also corporate governance. The study recommends that the current owners who include the stockbrokerage firms should commit to relinquish some of the ownership to the government and to the general public so that the stock exchange can be listed to trade like any other company. To ensure successful demutualization, the Government should work in collaboration with other stakeholders to ensure there is no resistance to the whole process of demutualization. The study recommends during the whole transition period on demutualization, the stock exchange should maintain high level of corporate governance to ensure that the interests of both the current mutual owners and investors are not affected. This is because high levels of corporate governance ensure that market confidence is held high