Discussion Paper No. 47 of 2005 on Growth of the Nairobi Stock Exchange Primary Market

Abstract

The study explores the development of the Nairobi Stock Exchange primary market since its inception in 1953. To understand the factors influencing growth of the market, the study uses a historical perspective approach. This captures the factors surrounding the development of the market, using a sample of 20 firms that had made public offers since 1980. The market has witnessed slow growth in the number of listed firms. The number of firms listed in 2005 is less than that at independence (1963). There are very few locally-owned firms and there has been a significant number of delistings. There are on-going attempts to establish a second-tier market, which would accommodate firms that do not meet the listing requirement but have the potential to grow. However, unless the culture of share trading is well cultivated, such a move may not be sustained. Therefore, mass education on the stock market operations is important to the business community. Similarly, if the business environment is such that it threatens the growth and survival of the firms, the prospects of having such firms listing even in the second-tier market are very slim. The government needs to sustain a favourable business environment to reduce the risk of growth and survival of such firms...