Market reaction to announcement of cross-border listing for companies quoted at the Nairobi Stock Exchange
Abstract
Stock market behavior is very crucial in shares and other stock returns predictability. Kenyan capital market has become more dynamic in the recent past and the Kenyan population has become more knowledgeable and informed. This is seen, more so, with the recent trend towards cross-listing which has seen 5 companies doing 10 cross-listings in Uganda, Tanzania and Rwanda Stock Exchange. However, little is known about how the Kenyan market reacts to cross-border listing announcements; a gap which this study sought to establish by analyzing the market reaction to announcement of cross-border listing for companies quoted at the NSE.
The event study was conducted by surveying all the companies that had announced cross- border listing which were 5 in number but had done an aggregate of 10 cross-border
listings in Uganda, Tanzania and Rwanda Stock Exchange. The study collected secondary data on daily stock prices of cross listed shares and 20-share index for 61 day event
window.
The study used market model to analyze the abnormal returns, cumulative abnormal return and the security return variability following the announcement of cross border listing. The study found that the market reacts negatively to announcements of cross-border listings though the reaction is infinitesimal which pointed at imperfect market efficiency in the semi-strong form. The study also found that the market do not look at the stock exchange in which the particular share cross listed since the market reaction followed a similar pattern.
Publisher
University of Nairobi, Kenya