The Impact of Cross-listing on Share Returns for Firms Listed at the Nairobi Securities Exchange

Abstract

This study sought to examine how cross-listing affects the share returns of cross-listed at the Nairobi Securities Exchange. The research design adopted in this study was the experimental research design. The population was 64 listed companies in Kenya from which 16 firms were sampled out with 8 of the firms being cross-listed ones. The final sample consisted of 14 firms after one cross-listed firm was dropped for lack of data. This study used secondary data obtained from the NSE Secretariat. Specifically, data was gathered on annual share prices of firms selected for the study for an 8-year period (3 years before and 5 years after the cross-listed firms did so), the total assets, and the NSE 20 share index. The study used descriptive analysis and ANOVA test of differences. The study found that there were no statistically significant differences between the abnormal returns of cross-listed stocks and no-cross-listed stocks. The study concludes that cross-listing does not lead to better performance of cross-listed stocks and neither does it hurt the rival firms. The study recommends that firms in Kenya need to vet the markets in which they seek to cross-list on in terms of their reputation vis-à-vis the local stock exchange before they cross-list as the current East African markets do not offer any premium.