Effect of Cross-border Listing on Financial Performance of Companies Cross-listed Within the East Africa Securities Exchanges

Abstract

Corporations can raise their expansion capital domestically or through cross-border listing of shares that facilitate enhancement of firm’s visibility and value, and lessens information asymmetry. However, there is scanty evidence on how cross border listing affects a firm’s financial performance. The objective of this study was to determine the effect of cross-border-listing on financial performance of companies cross-listed within the east Africa securities exchange. This study used an event methodology where financial data spanning three years before and after cross-listing. Data for this study was collected from financial statements of five Kenyan firms which have primary listing in the nse, and have further cross-listed their shares in the ease. Using financial ratio analysis, liquidity, profitability, gearing and investor ratios were computed three years before and after cross-listing. Results of this study show that in absolute terms, cross border listing improves financial performance of firms cross-listed within the east Africa securities exchange. On comparing the mean between the two periods, the study used t-test and chi-square. The study found out that the movement in absolute mean was not an element of chance as shown by trends in t-statistics in terms of standard deviation and standard errors. Chi-square indicated that the observed difference between pre and post listing was statistically significant. The study concluded that cross listing has significant impact on financial performance of cross-listed firms but at a low level. In line with this conclusion the study recommends that the capital markets policy makers of east African countries not only have to harmonize the regulations, rules and policies but should also host sensitization forums aimed at creating awareness to the eac companies on the opportunities and challenges that exist for cross-border listing firms