The effect of cross-listing on the value of firms cross-listed within the East Africa securities exchanges

Abstract

Before 1997 when Kenya, Uganda and Tanzania signed a memorandum of understanding to establish the East Africa Regulatory Authority whose objective was to establish a framework for a mutual cooperation in the area of capital market development, harmonization of securities laws and promotion of information–sharing and cooperation among members, companies had not cross-listed their shares, but it was until 2001 when East Africa Breweries Ltd become the first company to cross-list its shares. The objective of this study was to determine the effect of cross-listing on the values of firms cross-listed within the East Africa Securities Exchanges; and the findings of the study shall be of importance to Investors, Policy makers, Academicians and Researchers. To achieve the objective of the study, Event study methodology was adopted and the approach outlined in MacKinlay (1997) was followed. Seven firms which had cross-listed their shares were sampled for this study; and an estimation and event period of 120 days and 41 days respectively were chosen. Market model equation was used to calculate the market model parameter using the estimation period data. The findings of the study showed that cross-border listing increases the value of a firm therefore it is recommended that the policy makers especially countries within the East Africa Region should focus on formulating policies that enables the integration of their securities markets.