A Survey of the Motivation to Going Public Among Private Hospitals in Kenya

Abstract

Health is a fundamental human right, which must be supported by fair and sustainable health financing systems, based on equity and efficiency in promoting universal access to quality health care and protecting people, especially those living in poverty or in conflict areas, from financial risks and catastrophic health expenditures. The main objective of this research was to find out whether IPO-based equity financing strategy is a viable alternative method for meeting the capital demand in the health care industry in Kenya since fuelling the growth and expansions in the industry is not possible through bank loans and private equity alone. The survey of finance managers from eight private hospitals in kenya which are big enough to go public about the motivations of going public identified financing for growth as the most important benefit of an IPO. Their views on other motivations vary from hospital to hospital. Seven of the eight hospitals surveyed view going public primarily as a means to raise capital for growth and as a vehicle to strengthen their bargaining power with creditors without relinquishing control. Despite divergent views on other issues, nearly all finance managers agree that the benefits of going public significantly outweigh the costs. The study asked questions on assumptions and implications of several IPO models. The results provide strong support for the IPO theories that emphasize financing as a major advantage of an IPO, and medium support for models that focus on investor recognition, balance of power, monitoring, and financial flexibility as major benefits among different hospitals. The study finds less support for the asymmetric information and cost of capital theories. Evidence gathered suggests that going public is a viable alte