Regulatory modularity and access to capital market by small and medium sized enterprises in Kenya
Gachigo, Justin Irungu
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The general objective of this study was to investigate the contribution of regulatory modularity on small medium sized enterprises’ access to capital markets in Kenya. Specifically, the study sought to: to investigate the contribution of capital on access to capital markets by small medium sized enterprises in Kenya, to examine the influence of information on access to capital markets by small medium sized enterprises in Kenya, to explore the influence of legal and regulatory requirement on access to capital markets by small medium sized enterprises in Kenya and to investigate the influence of cost of listing on access capital markets by small medium sized enterprises in Kenya. This study was guided by, Pecking Order Theory, Agency cost theory, Credit Rationing Theory and Life Cycle Theory. The target population was 100 SMEs owners. The sample size was 96 SMEs owners. The study used questionnaires, containing both open ended and closed ended questions to obtain primary data. The research instrument was pretested with a sample of the respondents. The reliability of the instrument was estimated using Cronbach’s Alpha coefficient. The research instrument was subjected to content validity test and a pilot test to ensure that the questionnaire was reliable to answer the research questions. This ensured that all facets under the study were covered. For research data analysis and presentation, data was collected, edited and coded to ensure consistence. Descriptive statistics including the means and standard deviations was used to analyze the data and capture the characteristics of the variables under the study. Inferential statistics was used to test the nature and magnitude of the relationship between dependent and independent variables. The correlation results of the study revealed that capital contribution and information sharing are positively related with access to capital market. Results further showed that legal requirements and cost listing are negatively related with access to capital market. Capital contribution, information, legal requirements and cost listing were found to be significant variables in explaining access to capital market. This is supported by coefficient of determination also known as the R square of 48.4%. Regression of coefficients results showed that capital contribution and information sharing are positively and significantly related with access to capital market. Regression results further indicated that legal requirement and access to capital marketare negatively and significantly related. Based on the findings the study concluded that capital contribution, information, legal requirements and cost listing influence access to capital markets. The study recommends that SMEs in Kenya broadens its capital base to increase its competitive advantage in the market. They should also ensure information flow regarding operations within the NSEs. The study recommends that SMEs firms ensure that they meet basic requirements of the Nairobi Securities exchange to qualify listing. NSE should ensure that their legal requirements for SMEs firms are not that tight as those of big firms.