A survey of the factors that account for the dismal listing at the Nairobi Stock exchange (Kenya)

Abstract

The objective of the research project was to establish the factors that account for the dismal number of additional listings at the Nairobi Stock Exchange (NSE) over the last fifty years of its existence. The number of listed companies at the NSE has oscillated around 50 since its establishment in 1954 despite the existence of profitable private companies whose sizes, growth rates and profitability may exceed those of the already listed companies and the potential benefits they are likely to recoup from being listed. The Government has undertaken several steps aimed at boosting the contribution of capital markets in the economic development of the country. These include the establishment of the Capital Markets Authority as the primary regulator over the activities in the sub-sector and provision of numerous fiscal and monetary incentives aimed at attracting the participation of the public in making use of the capital markets to ensure attainment of desired goals. In effect, the study was set to find out from a sample of non-listed companies whether they understand the existence of the capital markets, potential benefits and their real or perceived inhibitors to seeking listing at the NSE. The study utilized primary data collected from a sample of 25 out of 60 targeted non-listed companies. The analysis procedure involves the tabulation of the responses such as the factors considered by the sampled companies to be impediments to list at the NSE as well as suggested solutions to this phenomenon. The respondents indicated that stringent and numerous entry requirements are the main obstacle•s. for private companies not to seek listing at the NSE. The other obstacles include the profitable track record, stringent and numerous continuous listing requirements as well as the quantity and quality of disclosures. These findings agree with those of Mbui Wagacha (2001) wherein the regulatory framework was rated good by 44.4% of the respondents while a cumulative 56.6% regarded it as very poor to fair. Also Ngugi and Njiru (2005) noted that a good regulatory system creates an enabling environment for facilitate listing. This means that efforts of boosting listings in the stock exchange should address these areas of concern as well as enhancing- creation of public awareness and education as to the

existence and usefulness of the capital markets to the public and the economy as a whole. Ngugi and Njiru (2005) recommended that mass education on the stock market operations is important to the business community. This research project has been organized into five chapters. Chapter one covers the introduction, which gives the background to the study while highlighting its objectives, statement of the problem and the importance of the study. Chapters two and three cover the literature review and research methodology respectively. The findings and their analysis are presented in chapters four and five.