Benefits accruing to companies listed at The Nairobi Stock Exchange

Abstract

This study sought to find out the benefits that companies listed at the Nairobi Stock Exchange enjoy. Evidence from research indicates that an increasing number of companies see going public as a way to improve their reputation and social capital with beneficial effects on their capacity to access external resources and opportunities for new entrepreneurial ventures. Previous research has mainly focused on the long run performance of initial public offers. Research in different markets has produced different results. No research has been carried out in Kenya to find out what benefits accrue to firms listed at the NSE, thus the need for this research. The population covers all companies that were quoted at the Nairobi Stock Exchange as at 30 September 2005. The study makes use of primary data. The data was collected using questionnaires. Questionnaires were subjected to a statistical analysis of frequency, in order to obtain a relative assessment of the extent of the different aspects of the listing benefits and crosstabulation and in order to check for significant differences across various industry sectors. Factor analysis and principal component analysis were also used. The research found out that going public allows firms to access external fmancial resources. The decision to go public improves the liquidity of a Company's shares as well as the scope for diversification by the initial shareholders of the company.. Other benefits realised include positive public image and better management of quoted companies. It is clear that companies realise many benefits from listing their shares at the NSE. -- v The stock exchange must play an increasingly educational role; the Capital Markets Authority as the regulatory agency must alter its approach from the sometimes heavy-handed type of control to a more proactive, creative and supportive role in order to assist in the creation of a more vibrant and forward looking capital market environment. This it can do by seeing itself as a catalyst in development rather than as a traditional regulator of what is a very small market. o More companies should consider listing at the stock exchange and enjoy the benefits that come with listing.