The effects of initial public offering on the financial performance of companies listed at the Nairobi securities exchange

Abstract

This research investigates the change in performance of firms in Kenya as they make the transition from private to public ownership through initial public offerings (IPOs). The study compares the performance of the firms before and after going public. The performance of firms from previous study has shown a decline on the post- issue operating performance. This study confirms that the same still holds in Kenya. The study examined 6 Kenyan IPOs issued on the NSE from 2002-2012. The study compares the pre-issue financial performance against the post-issue financial performance of the 6 Kenyan IPOs. The study will adopt a descriptive research design. Descriptive analysis will use the mean and standard deviation to measure the variables. The study measures the decline on financial performance by use of ratios; it used the return on assets, return on sales, current ratio and fixed asset turnover ratio.