A survey of the potential benefits of demutualization of Nairobi Stock Exchange
The purpose of this study was to identify the principal benefits that will be accrued from the demutualization of the Nairobi Stock Exchange (NSE). The basis of the problem regarding demutualization that the research aimed to explore was discussed based on this research objective. This were to identify how demutualization would improve stock exchange and the key issues towards embracing effective demutualization process at NSE. This involved finding out how demutualization at the NSE can improve the overall operations and key considerations that are vital in enhancing effective demutualization of stock exchange market. The study was done using the descriptive survey method. The target population were the middle level managers of the 19 licensed members (stockbrokers) of the NSE in Nairobi. The sample size was 38 respondents, two employees from each stockbroker. In this study the researcher used simple random sampling. To complement each other, structured questionnaires with open ended and closed questions were used. The raw data from the field was analyzed using descriptive and inferential statistics. Here percentages and cross tabulation were used. The study found that demutualization could improve the general operations at stock exchange in NSE. This is in the line of; changing the structure of NSE, realization of value for members, prompt and flexible decision making, opening up access to markets, diversifying new markets, spreading of ownership risks for firms operating at NSE, ease access of capital. Furthermore demutualization would enhance restructuring of corporate governance where operations are run by experienced management team which is driven to improve the exchanges bottom line. In addition the study findings concluded that demutualization enhances NSE capacity to raise capital and expansion of trading platforms by going public to raise capital, new shareholders and through share offerings to non members, elimination of conflict of interest, independent people will own it and all interest will therefore be catered for. Attracting highly qualified personnel, fair and competitive recruitment & human capital retention policies, enhanced disclosure of information will make more accessible to the public and catch the attention of those interested to pursue a career in the industry. Demutualization aid in unlocking members equity value in realizing market value of their equity and upgrading business. Demutualization would assist in removing barrier of entry for new brokers as: all the decision will be in the hands of the shareholder which who will determiner if and when to add on more brokers depending on the existing broker performance. Brokers will enter on merit since demutualization will dismantle the current cartel-like structure of ownership. Demutualization may relax entry rules.