Factors influencing financial innovation in kenya’s securities market: a study of firms’ listed at the Nairobi stock exchange.
Mwangi, Moses K
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The Kenyan security market in regard to spurring new financial innovations remains relatively poor despite being ranked the fourth best in Africa. Our domestic capital market has few financial instruments and does not have the capacity to incorporate new financial instruments in the context of the current legal, regulatory and institutional framework. This study was therefore designed to identify factors influencing financial innovation in Kenya’s securities market: A study of firms listed at Nairobi stock exchange. A population of 48 respondents was examined and descriptive study was used .The study establishes a number of factors influencing financial innovation. From the study, regulatory factors influence financial innovation. These are: NSE rules and requirements relating to the listing of quoted companies, Kenya laws protecting investors’ interest at the stock market, restrictive rules and regulations of the CMA concerning licensing and control of markets, and high corporate taxes. Under market volatility, unstable foreign exchange rates and fluctuations of interest rates in Kenya all had an influence on financial innovation. All factors which fell under technology and global financial competition and integration had an influence on financial innovation. Absence of derivatives at our stock market was also an influencing factor. The study established need to address market imperfections such as moral hazard, informational asymmetry, and transaction costs if our domestic capital market is to edge closer to that of developed capital markets and reap the accompanying benefits associated with financial innovations. There is also need to speed up regional integration. The regulatory authorities should address the current legal, regulatory, and institutional framework and explore new financial instruments to consolidate the current gains realized by the capital markets so far.