Influence of market capitalization of Nairobi stock exchange listed companies on Kenya's economic growth
This study sought to investigate the influence of market capitalization of Nairobi Stock Exchange listed companies on Kenya's economic growth. The need to carry out this study arose from the fact that listing of companies by market capitalization is taking place but economic growth is only seen to be increasing at a decreasing rate and some fluctuations are also prevalent. The Nairobi stock exchange is aimed at promoting economic growth through mobilizing savings to investment but this has not proved to be adequately achieved. The population consisted of 54 listed companies from which a sample of 48 companies was selected by stratifying the population and randomly selecting companies from all the sectors. This sample was based on 5% sampling error and therefore it was a representative of the population as a whole. The sample comprised of three companies from agricultural sector, nine from commercial and services sector, twelve from finance and investment, sixteen from industrial and allied sector and eight from alternative investment segment. Data was analyzed through tabular presentations pie charts and graphs. The analysis touched all the research questions. Findings from the study revealed that the Nairobi stock exchange has not done enough to promote economic growth and that the government if also failing in the same area. The government was particularly found to have very strict requirements for companies to go public. It also emerged that the number of listed companies has remained below 60 for a long time and among the companies listed in the stock exchange, only a few are actively traded. The findings also revealed that not many stakeholders are well informed about investment in the stock market. The market capitalization of equities was seen to be closely linked to other factors that promote economic growth that is investment in human capital, investment in physical capital. Growth in labour force and technological advancement. Recommendations touched on the need for the government to provide more incentives and to reduce the requirements in order to encourage more companies to go public. The study further recommends that a similar study should be done on the economic strategies that can be adopted by the government to boost economic growth. The study concludes that capital markets are an essential part of modern economies that provide alternative tools to savers and non-bank sources of finance for enterprises. The listing of companies enables them to expand their basis and in the long run economic growth goes up.