The Effect of Cross Listing on the Value of Firms Listed at the Nairobi Securities Exchange

Abstract

Cross listing is meant to improve informativeness of the firm’s stock price and also enabling firm’s managers to get precise information on the best future opportunities for investment purposes. In Kenya, several Kenyan firms have cross-listed in markets that have better investor protection such as Rwanda, which has better regulations in terms of investor protection in the region. However, there is very limited secondary trading in cross-listed companies in all the East Africa Community Partner State owing to different levels of market development and the capital adequacy requirements for the different EAC Partners. There is also lack of harmonized legal regimes, which is one of the major hindrances to secondary trading of shares in cross-listed companies. This study aimed at establishing the effects of cross-listing on the value of cross-listed firms at Nairobi Security Exchange. Employing an event study methodology, the study carried out a census of the 8 cross listed firms at the Nairobi Securities Exchange. The secondary data covered a period 4 years before cross listing and a period of 4 years after cross listing of each cross-listed firm. The study used the paired t- test method to determine whether cross listing affects the value of the cross-listed firms. The finding of the study established that t statistic for EABL, KCB, Centum Investments and the Nation Media Group (NMG) before and after cross listing was insignificant at 95% confidence level. The finding of the study established that t statistic for Kenya airways (KQ), Jubilee insurance, Equity bank and Uchumi supermarkets before and after cross listing was significant at 95% confidence level. The study concluded that cross listing had no significant effect on the value of EABL, KCB, Centum Investments and the Nation Media Group and that cross listing had a significant effect on the value of Kenya airways (KQ), Jubilee insurance, Equity bank and Uchumi supermarkets. The study recommended that the NSE should encourage firms to cross listing since cross listing affects the value of listed firms.