A survey of the challenges and benefits of regional cross listing: the case of eligible companies quoted at the Nairobi Stock Exchange

Abstract

The objective of this study was to identify the challenges that companies listed at the Nairobi Stock Exchange (NSE) and are eligible for cross listing in the regional exchanges face, and the benefits that accrue or are realizable upon cross listing. Past research has mainly focused on the impediments to listing at the NSE and the benefits accruing to firms listed at the NSE. It might be of interest to establish what challenges and benefits are there in cross listing regionally, Research in different markets has also come out with different results in addition to highlighting that there are in majority of cases, net benefits that accrue to firms that cross list. Regional cross listing has performed dismally since the time the NSE started trading some 54 years ago and since 2001 when the first Kenyan company cross listed, and with only a further two companies cross listing into the regional exchanges, namely the Uganda Securities exchange and the Dar es Salaam Stock exchange thereafter. This is despite about 40 being listed on the main investment market segment and therefore meeting the main eligibility requirement for cross listing regionally. This would portend there are issues or challenges that eligible NSE listed companies have faced. The study used primary data collected through questionnaires administered to respondents from 40 targeted eligible NSE listed companies. The response rate for the questionnaires administered was 60%. The data analysis procedure involved the tabulation of the responses such as the factors considered by the respondent companies to be challenges and impediments to regional cross listing. Data was also presented using tables from coded questionnaires and means, and their rankings were used to analyze and present the findings. From the study, the firms' need to attain an increased market visibility, the ability to finance growth and development out of cross listing initiative, having an improved firm's image and status, and attaining desired liquidity of company shares, are the main challenges for eligible NSE listed companies seeking regional cross listing at the Dar es Salaam and Uganda Stock exchanges. The research findings reveal that the other challenges firms listed in the Main investment market segment consider or encounter in order of ranked importance include: the development of strategic alliances and, meeting shareholder requirements. However, tax incentives, governance and capital structure issues, received low ratings in the importance of challenges. In the case of benefits realizable, those highly rated were attaining an improved corporate image and prestige, acceptance and recognition of company brand across the region, and attaining a wider capital base. With the demystifying of the perception that major bottlenecks exist and hardly any significant net benefits accrue from cross listing, more eligible companies should cross list regionally in order to reap the benefits of cross listing.