The Effect of Initial Public Offers on the Financial Performance of Firms Listed at the Nairobi Securities Exchange

Abstract

The study sought to investigate if there is significant difference in profitability, liquidity, leverage and the overall financial performance of companies before and after going public. The study analyzed fourteen companies which went public before 2000. The study used balance sheets and the Income statements to compute financial ratios which were the basis of the study. The ratios which were analyzed include: profitability, liquidity and leverage ratios. The data was analyzed using the MS Excel. Trend analysis findings showed that profitability, liquidity, leverage and the overall financial performance increased after IPO. Generally the finding showed that the overall financial performance after going public improves in terms of trend analysis but not significantly though the profitability increases significantly. The decision to go public affected not only the profitability but also the overall financial performance. The study concludes that private companies should start thinking of going public to reap the benefits associated with it. Though there substantial costs associated with going public, companies should not shun from the process since it has numerous benefits