Impact of cross border listing on share liquidity. A case study of NSE listed firms cross listing in other EAC security exchanges

Abstract

The purpose of this study was to examine the impact of cross listing on share liquidity for cross listed firms within East Africa with emphasis on the domestic market which is the Nairobi Securities Exchange (NSE). A census study was carried out for all the firms that cross listed in the East African Community (EAC) in the last five years and included, Kenya Commercial Bank, Equity Bank, Nation Media Group and Centum Investments. Traded volume and turnover were used as measures of liquidity where their means were calculated pre- and post- cross listing and tested for significance using a paired t- test at five percent level. Secondary data was collected and analyzed from the NSE. Most of the results were not statistically significant. Share liquidity improved for Equity Bank, Nation Media Group (NMG) and Centum Investments measured by traded volume with that of Equity Bank and Centum being statistically significant. Kenya Commercial Bank (KCB) share liquidity declined after cross listing, though the decline was not statistically significant. Share liquidity measured by turnover improved for NMG and Centum shares, while it declined for Equity Bank and KCB shares after cross listing. Of these results only Centum‟s was statistically significant. This implied that liquidity improved for NMG and Centum shares, while it declined for Equity and KCB shares. It can therefore be generally concluded that cross listing impacts a firm‟s shares liquidity both positively and negatively according to the measure of liquidity utilized, although in most cases that impact was not statistically significant. Based on the findings of the study, it is recommended that managers and policy makers cross list for other reasons such as penetration of new markets and not stock liquidity since most of the changes in liquidity were not statistically significant.