Why do companies go public? Evidence from nairobi stock exchange

Abstract

The study sought to find out the reasons that drive firms to go public. The study analysed fifteen companies which went public between 1990 and 2008. Exploratory survey was used as it enabled the researcher to obtain information from broad category of firms. The study used structured questionnaires to obtain the necessary information. The data was analysed using Microsoft Excel and the Statistical package for social sciences (SPSS) which were utilized to perform the various statistical analysis. The findings showed that the major reasons why companies go public are the capital raising aspects and the implementation by the government of its divestiture policy. The main problems encountered are the high listing cost and the stringent market regulations by the Capital market authority (CMA) and the Nairobi stock exchange (NSE) who are the main players. Minimization of cost of capital and broadening the ownership base of the companies were cited as the main motivating factor for conducting an Initial public offering. In conclusion, companies either private or public corporations should go public so as to tap the vibrant market and enjoy the benefits that come with being public.