Impact of Cross-Border Listing on Stock Liquidity: Evidence from East African Community
Journal of Finance and Accounting
Volume 3, Issue 1, January 2015, Pages: 10-18
Received: Jan. 19, 2015; Accepted: Feb. 1, 2015; Published: Mar. 3, 2015
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Authors
Stephen Matheka Makau, Faculty of Commerce, Egerton University, Nakuru, Kenya
Samuel Owino Onyuma, School of Business, Laikipia University, Nyahururu, Kenya
Agatha Nabwire Okumu, Finance Department, Safaricom Ltd, Nakuru Retail Centre, Kenya
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Abstract
The purpose of this study was to examine the impact of cross listing on share liquidity for cross listed firms within East African Community, with the domestic market being the Nairobi Securities Exchange. A census was carried out for Kenyan listed firms that have cross-listed into other EAC exchanges in the last five years. Secondary data was collected from the NSE data base. Stock traded volume and turnover were used as proxy measures of stock liquidity. Their means were calculated pre- and post- cross-listing and tested for significance using a paired T-test at five percent level. Most of the results were not statistically significant. Stock liquidity improved for Equity Bank, Nation Media Group and Centum Investments measured by traded volume with that of Equity Bank and Centum being statistically significant. Kenya Commercial Bank stock liquidity declined after cross-listing, though the decline was not statistically significant. Stock liquidity measured by turnover improved for Nation Media Group and Centum shares, while it declined for Equity Bank and Kenya Commercial Bank shares after cross-listing. Again, only results for Centum was statistically significant. Overall, stock liquidity improved for Nation Media Group and Centum shares, while it declined for Equity and Kenya Commercial Bank shares. Generally, it can be concluded that cross-listing improves a firm’s stock liquidity both positively and negatively according to the measure of liquidity utilized, although in most cases that impact was not statistically significant. Based on these findings, the study recommends that corporate managers should consider cross-listing for other reasons such as penetration of new markets but not to improve their stock liquidity.
Keywords
Cross-Border Listing, Stock Liquidity, Traded Volume, Stock Turnover, Nairobi Securities Exchange
To cite this article
Stephen Matheka Makau, Samuel Owino Onyuma, Agatha Nabwire Okumu, Impact of Cross-Border Listing on Stock Liquidity: Evidence from East African Community, Journal of Finance and Accounting. Vol. 3, No. 1, 2015, pp. 10-18. doi: 10.11648/j.jfa.20150301.12
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