The Impact of Cross Listing on Share Returns for Firms Cross-listed in the East Africa Securities Exchanges

Abstract

Cross listing is one among several corporate policies that may affect the performance of firms. The celebrated benefits of cross listing are increased liquidity, reduction in the cost of capital, broadening stakeholder base and bonding of firms to stronger legal frameworks among others. The objective of the study was to establish the effect of cross listing on share returns of firms cross-listed in the East Africa Securities Exchanges. The study employed an event study methodology since it involved the comparison of share returns three years before and three years after an event, in this case cross listing. The population of the study included all the cross-listed firms in the East Africa Securities Exchange with their primary listing in the Nairobi Securities Exchange. The final sample of the study included 3 frims that had their primary listing at the NSE and had cross-listed in any other East Africa between 2010 and 2017 firms .The study period was three years before cross listing and three years after cross listing of each of the cross-listed firms. Secondary data on share prices and dividends per share was collected from the NSE handbooks of the respective periods under study. The share prices and dividends paid were used in the computation of monthly share returns. The study used the paired samples t-test to determine whether cross listing had an impact on the share returns of the cross-listed firms. The study found the t statistics of NMG, Centum Investments and Uchumi supermarket to be statistically insignificant at the 95% confidence level. The study recommended that companies in East Africa that choose to cross list should carefully evaluate the market in which they want to cross list to so as to determine what other benefits they are likely to achieve since the improvement in share returns is not one of them.