An Assessment of the Slow Rate of Insurance Firms Listing at the Nairobi Securities Exchange
Olum, Beatrice Anyango
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Capital markets are an essential part of the financial sectors of modem economies. The markets promote economic growth through enhanced savings mobilization. Nairobi Securities Exchange acts as an avenue for listed firms to raise funds for different purpose such as development and expansion (non-bank sources of financing). It also provides alternative savings tools to savers among others. Nevertheless, in an economy of many private enterprises, some corporate firms have listed in the market while many others that qualify do not list. According to NSE (2012) there are 60 listed firms and out of these, there are only 5 insurance firms listed despite the fact that there are 45 registered insurance firms in Kenya. The question to ask is; why are corporate firms and especially in the insurance sector slow to list their shares at the Nairobi Securities Exchange despite the enormous benefit that accrue to a 'firm listing at NSE? This study therefore sought to answer this question as it explored the determinants contributing to slow rate of insurance firms listing at the Nairobi Securities Exchange. This study adopted a descriptive research design. The target population for this study was the top and middle level management of all Insurance companies in Kenya licensed by IRA but not listed in the NSE. The study utilized primary data, which was collected using questionnaires. The data was analyzed using qualitative and quantitative techniques. This was aided by Statistical Package for Social Sciences (SPSS). This involved reducing accumulated data to a manageable size, developing summaries, looking for patterns and applying statistical techniques. The data was presented through the use of tables, bar charts and pie charts among others. The study found out that the overall cost of listing was high and this was contributing to most firms not listing at the Nairobi Securities Exchange. Some of the cost found to be high included; fees of the issuing house and underwriters, sponsoring broker's fees, auditor's fees, tax charged on the listing costs and other extraordinary expenses incurred in the flotation. The study recommends a total reduction on cost of listing by the Capital Market Authority and the Nairobi Securities Exchange to attract non listed firms at the burse. Reduction in listing cost will go a long way in attracting new investors into the capital markets.