Secondary Equity Offer Announcements and Share Returns at Nairobi Securities Exchange, Kenya
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Date
2019
Authors
Marangu, Kenneth
Muathe, Stephen M. A.
Mwangi, Lucy
Journal Title
Journal ISSN
Volume Title
Publisher
Sciedu Press
Abstract
This paper
empirically analyzes the effect of secondary equity offer announcements on share returns at Nairobi
Securities Exchange in Kenya by investigating the information content of the announcements and ascertaining
whether the release of financial information in the capital market affects share returns. An event study employing the
market return model determined share returns of 52 bonus issues and 28 rights issues announced between January
2006 and December 2015. The study established that secondary equity offer announcements had a significant and
positive effect on share returns and that rights issues witnessed higher share returns when compared to bonus issues
during the twenty day event period. This study recommends management of Nairobi Securities Exchange lis ted
companies to raise capital through secondary equity offers, as companies will increase their market capitalization.
Investors on Nairobi Securities Exchange are encouraged to participate in secondary equity offers because they will
earn positive share returns and increase their wealth. Existing shareholders should fully participate in rights issues
because they will forgo positive share returns if they renounce their rights. Capital Markets Authority and Nairobi
Securities Exchange should encourage more listed companies to raise capital through secondary equity offers, as this
is advantageous to companies and investors.
Description
Research Article
Keywords
Event study, Nairobi Securities Exchange, Secondary equity offer announcements, Share returns
Citation
International Journal of Financial Research Vol. 10, No. 6; 2019