Factors affecting the development of emerging markets: A case of the Nairobi Stock Exchange.
Abstract
The study looked at the factors affecting the development of the Kenyan stock market.
The analysis was based on the effect of factors on the development of the NSE by
examining the following characteristics: The legal and regulatory framework,
Information disclosure requirements, Transparency of transactions, Accounting and
auditing standards, Transaction costs, Delivery and settlement, Barriers to entry and
exit, Taxation of investment income, Public knowledge of securities markets plus any
other factors emerging in the course of the study.
Primary data was collected by a self administered questionnaire. A semi structured
questionnaire based on a five point Likert scale was used. The data collected for the
study was analyzed using factor analysis technique. Descriptive statistics were used
to analyze data by way of frequency tables, percentage proportions and mean scores
while content analysis was applied to data that could not be quantified.
The study established that factors particularly the legal and regulatory framework that
ensures the protection and security of investors are in place, and that the call-over
system of transactions is very transparent. Low levels of public awareness was found
to be a major factor inhibiting the development of the stock market in Kenya It also
found that the delivery and settlement of transactions are performed satisfactorily by
brokers; however the introduction of a fully centralized clearing system would
significantly improve upon the clearing and settlement procedures. The study further
establishes that the entry into and exit from the NSE are without any significant
restrictions.
There is a need to educate the Kenyan public about the activities of the NSE and to
promote investment in general. Also the government should give fiscal incentives in
the form of taxation in favor of listed companies, and to pursue prudent
macroeconomic policies, particularly in the area of inflation management. A regular
review of the legal and regulatory framework within which the investment laws operate
is necessary to boost the confidence of investors.
Citation
Masters thesis University of Nairobi (2006)Publisher
University of Nairobi. School of Business Studies
Description
Master of Business Administration