The Effect of Cross Listing on the Liquidity of Shares Listed on the Nairobi Securities Exchange

Abstract

For a company that is already listed on an exchange, an alternative route is to cross list. Cross listing is where a firm lists its shares for trading on at least two stock exchanges located in different countries. Listing of a company's equity in foreign markets brings the opportunity to enhance corporate image, advertise trademarks and products, get better local press coverage, and become more familiar with the local financial community in order to raise working capital locally, establish a secondary market for shares used to acquire other firms in the host markets. The purpose of this study was to establish the effect of cross listing on liquidity. The study adopted a descriptive research design and secondary data was collected for 4 Kenyan companies that are cross listed in other security exchange markets in East Africa. Regression and correlation analysis were used to establish the effect in terms of nature and magnitude. The findings from the study indicated that cross listing explains 62.2% of the variance on share liquidity among the cross listed companies in Kenya. It was also clear that there exists a moderate positive correlation between the price of cross listed shares and the volume of the share that are traded at the securities market.