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The Nairobi stock exchange and new equity capital: 1998 to 2004.

INTRODUCTION

The objectives of any stock exchange include two interlinked concepts. Their primary market role is to facilitate the movement of capital from savers to investors. In process of the primary market activities they will often aggregate the resources of small individual savers into sufficiently large capital sums that they can be successfully invested by commercial companies. In their secondary market role, by facilitating transactions between willing buyers and sellers they establish fair market prices for existing shares (the efficient markets hypothesis). In turn, this secondary market role of share pricing enables (primary market) new share issues to be priced at, or close to, fair market prices, thus militating against disadvantaging the issuers or the buyers of those new shares. The two roles are, therefore, interdependent.

The nature of the stock markets of developed countries need no rehearsal here: suffice it to say that the stock exchanges of New York, London, Tokyo and so on have been material positive factors in the burgeoning economies of the USA, Europe and certain parts of Asia for many years past.

Some parts of the developing world have also used stock exchanges as vehicles of development, with perhaps China and India being the most obvious recent examples. The Shanghai Stock Exchange (SSE) was founded on 26th November 1990 (Devonshire-Ellis, 2007). At the end of 2005, the SSE boasted 1069 listed securities and 834 listed companies, with a combined market capitalization of RMB 2,310 billion (SSE, 2005). In 2005, listed companies raised RMB 3 billion on the SSE through Initial Public Offerings (IPO) and share placements (SSE, 2005). There were a total of 131 new listings between 2003 and 2005 (SSE, 2005)

Stock exchanges in Africa appear to have missed out on many of the opportunities seized elsewhere. Although there is a long history of stock exchanges in African nations, some going as far back as colonial times, their growth rates have generally been slow, or even stagnant, and their role in capital mobilization appears, in many cases, to have been negligible.

Quoting data from the World Bank's Financial Structure database, Honahan and Beck list fifteen stock exchanges active in sub-Saharan Africa (i.e. ignoring the substantial and active stock exchanges in Mediterranean Africa, such as those in Morocco, Tunisia and Egypt).

The NSE was established in 1954: only South Africa (1887) and Zimbabwe (1896) are older. The remaining exchanges were all established in the last 25 years of the 20th century. Of those fifteen stock exchanges South Africa is clearly an outlier, while Kenya is typical of the other fourteen. These all share the following features: a limited number of stocks is listed, market capitalization is a small percentage of GPD, value traded is a small percentage of GDP, turnover is low, the concentration of firms is low and few bonds are listed. Parkinson (1984) examined the NSE in the context of development in Kenya. He reported that the NSE failed to make enough issues to satisfy savers' demands. Earlier Yacout (1980) had noted the heavy oversubscription of new issues in Nigeria and concluded that; there too, available savings were greater than new stock market issues. In this article we will focus on the Nairobi Stock Exchange (NSE). The method is to examine the capital structure of all the companies listed on the NSE. We will attempt to differentiate between those companies that needed capital for expansion and those that did not. In respect of expanding companies we will attempt to identify how they financed their expansion. We will focus on three main categories of sources of finance: primary market transactions (that is, new share issues); organic growth (through the ploughing back of profits); and lastly, borrowing. In this way we will make an informed judgment of the way the NSE has contributed to the raising of capital and the development of the economy.

We will also set the compare the sum of stock market activity against aggregate information for Kenya as a whole, to get a sense of the scale of its activity.

PREVIOUS RESEARCH

According to the Efficient Markets Hypothesis (EMH) all relevant information is immediately and accurately impounded in the market prices of shares. If the EMH holds true it is not possible to make an abnormal return by trading on the basis of available information. For a detailed discussion of the history and early development of the EMH see Fama (1970).

Empirically the EMH is tested in three forms: weak form; semi-strong form and strong form. A typical weak form test would be to check for any serial correlation between share prices on consecutive dates. The absence of serial correlation implies that the share prices are performing a random walk. It is generally agreed that stock prices are weak form efficient. A typical semi-strong form test would be to examine the behaviour of a share price immediately before, during and immediately after a known event such as an earnings announcement or a takeover agreement. As with weak form tests, there is extensive support for semi-strong form efficiency, particularly in respect of the stock markets of the developed world. The strong form of the EMH states that all information, public and private, is fully and immediately impounded in share prices. As it is not possible, by definition, to know all the private information, the strong form is not a testable hypothesis.

In this study we are not so much interested in technical efficiency, though that has been assessed by Dickinson and Muruga (1994) and Parkinson (1987) in respect of the NSE. As is observed in both those studies, even if the market deviates somewhat from technical efficiency, the thinness of market trading militates against investors being able to profitably trade on that knowledge. We are more interested in the question asked by Samuels and Yacout (1981). Their question, put in the context of Nigeria was: what contribution did the stock exchange make to the mobilization of capital and the development of the economy?

The purpose of a stock exchange in the developing country context is nicely put by Sudweeks (1989).

"Financial development work should respond to specific development objectives of individual countries. These are to contribute to faster, sustainable and socially equitable economic growth. These can be achieved through intermediation (bringing together both investors and borrowers), efficient allocation (allocating resources to their most productive use), adequate savings mobilization (mobilizing savings through financial instruments, rather than real assets), stability (absence of financial crisis, effective term transformation, and adequate risk capital), adequate accumulation of retirement funds for investors' nonproductive years), and social equity through broad access (allowing all members of society an opportunity to access the financial markets). An efficient and stable financial system will involve the creation of many different types of financial institutions and instruments. This ensures a reasonable distribution of savings among short-term (deposit-type or money market) instruments, long-term debt instruments (bonds) and risk capital (stocks and related instruments) to meet the overall financing needs of the economy." (Sudweeks, 1989, p 4)

One of the dimensions of any stock exchange is its relationship to the economy in which it operates. Useful comparative statistics are somewhat problematical here, but one useful source is the World Bank Data which shows the market capitalization of stock market securities by country, area and for the world as a whole.

"Definition: Market capitalization (also known as market value) is the share price times the number of shares outstanding. Listed domestic companies are the domestically incorporated companies listed on the country's stock exchanges at the end of the year. Listed companies do not include investment companies, mutual funds, or other collective investment vehicles." (World Bank, 2007).

Honahan and Beck (2007, p. 51) indicate that, for the eight most active stock exchanges in Africa other than Johannesburg (that is: Botswana, Cote d'Ivoire, Ghana, Mauritius, Mozambique, Namibia, Nigeria and Zimbabwe) the stock market capitalization as a percentage of GDP rose from about 13% in 1994 to about 23% in 2005.

The NSE is a country with one of the lowest ratios of stock market capitalization to GDP. In 2000 it was 10.1%, compared to 89.3% for the world as a whole: by 2005 it had increased to 34.1%, which, though a substantial increase over 2000, was still a small fraction of the 137% recorded for the world as a whole (World Bank, 2007). The logical conclusion is that while the role of stock markets generally is on a growth trajectory everywhere, including Africa, the NSE plays a comparatively minor role in the economy of Kenya.

By the end of 2004, the NSE had a total of 49 listed companies. These were classified into two market segments; The Main investments Market Segment (MIMS) and the Alternative Investment Market Segment (AIMS). The MIMS represents the main quotation market and has more stringent eligibility, listing and disclosure requirements (Wangacha, 2001). As at the end of 2004, this segment had 44 listed companies, which are further classified into four categories (agricultural, Commercial and services, Banking and Financial and Industrial and allied segments) (NSE, 2004). The AIMS has the same strict disclosure requirements as the MIMS but has a lower entry and continuance requirements with respect to minimum assets, share capital and shareholders. By the end of 2004, this segment had only five companies (NSE, 2004)

Overall statistics for the NSE are summarized in table 2. This shows, for the years 1998 to 2004, the book value of total assets for all companies listed on the NSE, broken down into debt and equity, and the equity broken down into shares and reserves. Reserves, in this context, are predominantly retained earnings, but also include other monies set aside out of earnings, whether legally distributable (such as a general reserve) or legally not distributable (such as a revaluation reserve).

STUDY FINDINGS

Table 2 show the equity raised by companies in the agricultural segment and the changes in their total assets during the period 1998-2004.

According to the results companies in the agricultural sector did not obtain any equity capital during the period under review. Indeed these companies borrowed over Kshs. 2 billion outside the NSE to finance operating losses.

Table 3 show the equity raised by companies in the Commercial and services segment and the changes in their total assets during the period 1998-2004.

Companies in this segment registered significant growth during the period under review. The total assets increased by over Kshs. 22 billion (93.7%). However only Kshs 226 million was raised though the NSE. Most of the expansion was financed through debt. It is to be noted that out of the nine companies in this segment only two companies issued shares to the public during this period (Appendix 1).

According to the results in Table four the total assets of banking sector increased by over Kshs. 112 billion during the period under review. Eight out of the 11 companies in this sector issued shares through the NSE raising a total of Kshs. 8.2 billion. However this amount is insignificant when compared to the Kshs. 102.4 billion that was raised through debt to finance expansion.

This is the largest segment in the NSE with a total of 20 listed companies. During the period under review ten of these companies issued share to the public through the NSE. A total of Kshs. 1.82 billion was raised. We however note that the total assets in this segment increased by over Kshs. 19.1 billion. Fifty-four percent of this expansion was finance through debt which increased by about Kshs 10.3 during this period.

The alternative segment had five listed companies. During the period under review, one company (Kenya Orchards Ltd) made an IPO which raised over Kshs. 57 billion. However most of the capital was used to finance operating losses that increased by over Kshs. 52 billion during the period. Overall the total assets in this sector increased by about Kshs. 121 billion. Much of this expansion was financed through borrowing, which increased by over Kshs.115 during the period under review.

Table 7 summarizes the changes in equities and total assets of the companies listed in the MIMS. According to the results only 6.6% of the expansion in this market was finance through new equity capital. Eight-seven percent of the changes in total assets acquired during this period was finance through borrowing which increased by over Kshs.132 during the six year period. In total 22 of the 44 companies in this segment issued new shares during the period (appendix 1). However these issues only raised Kshs. 10.3 billion which is insignificant when compared to the total investment in assets of Kshs. 154.5 billion during the period.

CONCLUSION

This study addressed the issue of whether the NSE has contributed to the raising of capital and hence the economic development in Kenya. Our findings indicate that although the company's listed in the NSE have registered an enormous growth during the period under review, much of this has been financed through borrowed capital and retained profits. We therefore conclude that the NSE has failed in its primary objective of helping investors to raise capital. Furthermore there is little evidence to suggest that the NSE has contributed to the economic development of Kenya. These findings confirm earlier finding by Kimura and Amoro (1999), who concluded that there was no significant correlation between economic growth and the growth of the NSE during the period 1985-1996. Future research may be directed towards the examination of why the NSE has failure to promote capital mobilization in Kenya. We suggest the use case study approach.
APPENDIX 1

Agricultural Sector (Kshs.'000')

 Equity Type Company Name 1998

1 Total share capital Unilever Tea Kenya Limited 488750
 Reserves Unilever Tea Kenya Limited 4794064
 Total debt Unilever Tea Kenya Limited 784794
2 Total share capital Kakuzi Limited 98000
 Reserves Kakuzi Limited 1993174
 Total debt Kakuzi Limited 848079
3 Total share capital Rea Vipingo Plantations Ltd 300000
 Reserves Rea Vipingo Plantations Ltd 208824
 Total debt Rea Vipingo Plantations Ltd 334518
4 Total share capital Sasini Tea and Coffee, Ltd 190046
 Reserves Sasini Tea and Coffee, Ltd 1940015
 Total debt Sasini Tea and Coffee Ltd 341656

Services and Commercial Sector (Kshs.'000')

5 Total share capital African Tours & Hotels Ltd 43400
 Reserves African Tours & Hotels Ltd -8607
 Total debt African Tours & Hotels Ltd 8928
6 Total share capital Car & General (Kenya) Ltd 111398
 Reserves Car & General (Kenya) Ltd 171050
 Total debt Car & General (Kenya) Ltd 363665
7 Total share capital CMC Holdings Limited 121398
 Reserves CMC Holdings Limited 1248526
 Total debt CMC Holdings Limited 2746844
8 Total share capital Hutchings Biemer Limited 3000
 Reserves Hutchings Biemer Limited 16895
 Total debt Hutchings Biemer Limited 167677
9 Total share capital Kenya Airways Limited 2308000
 Reserves Kenya Airways Limited 4199000
 Total debt Kenya Airways Limited 6885000
10 Total share capital Marshalls (East Africa) Ltd 72466
 Reserves Marshalls (East Africa), Ltd 1135566
 Total debt Marshalls (East Africa), Ltd 1208431
11 Total share capital Nation Media Group, Ltd 178300
 Reserves Nation Media Group, Ltd 13585000
 Total debt Nation Media Group, Ltd 662600

Agricultural Sector (Kshs.'000')

12 Total share capital Tourism Promotion Services
 Limited (Serena Hotels) 193395
 Reserves Tourism Promotion Services
 Limited (Serena Hotels) 319187
 Tourism Promotion Services
 Total debt Limited (Serena Hotels) 443518
13 Total share capital Uchumi Supermarkets Limited 300000
 Reserves Uchumi Supermarkets Limited 437886
 Total debt Uchumi Supermarkets Limited 1121826

Banking Sector (Kshs.'000')

14 Total share capital Barclays Bank of Kenya Ltd 1543000
 Reserves Barclays Bank of Kenya Ltd 6626000
 Total debt Barclays Bank of Kenya Ltd 62193000
15 Total share capital CFC Bank 500000
 Reserves CFC Bank 1102316
 Total debt CFC Bank 5114242
16 Total share capital Diamond Trust Bank (Kenya) 318000
 Limited
 Reserves Diamond Trust Bank (Kenya) 630791
 Limited
 Total debt Diamond Trust Bank (Kenya) 5487464
 Limited
17 Total share capital Housing Finance Company 575000
 Limited
 Reserves Housing Finance Company 969199
 Limited
 Total debt Housing Finance Company 11287037
 Limited
18 Total share capital ICDC Investment Company 141292
 Limited
 Reserves ICDC Investment Company 441409
 Limited
 Long-term debt ICDC Investment Company 34334
 Limited
19 Total share capital Jubilee Insurance Company 180000
 Limited
 Reserves Jubilee Insurance Company 1820263
 Limited
 Jubilee Insurance Company
 Total debt Limited 2978729
20 Total share capital Kenya Commercial Bank 1122000
 Limited
 Reserves Kenya Commercial Bank 9233900
 Limited
 Total debt Kenya Commercial Bank 68677335
 Limited
21 Total share capital National Bank of Kenya 1000000
 Limited.
 Reserves National Bank of Kenya -593352
 Limited.
 Total debt National Bank of Kenya 25355992
 Limited.
22 Total share capital NIC Bank Limited. 329658
 Reserves NIC Bank Limited. 1573444
 Total debt NIC Bank Limited. 5439742
23 Total share capital Pan Africa Insurance Holdings 65000
 Limited.
 Reserves Pan Africa Insurance Holdings 1622274
 Limited.
 Total debt Pan Africa Insurance Holdings 944792
 Limited.
24 Total share capital Standard Chartered Bank Kenya 824145
 Limited.
 Reserves Standard Chartered Bank Kenya 3169443
 Limited.
 Total debt Standard Chartered Bank Kenya 33938699
 Limited.

Manufacturing and Allied Sector (Kshs.'000'

25 Total share capital Athi-River Mining Limited 375000
 Reserves Athi-River Mining Limited 224946
 Total debt Athi-River Mining Limited 578382
26 Total share capital Bamburi Cement Company 1815000
 Limited.
 Reserves Bamburi Cement Company 8718000
 Limited.
 Total debt Bamburi Cement Company 1015000
 Limited.
27 Total share capital British American Tobacco 750000
 Kenya Limited.
 Reserves British American Tobacco 3635837
 Kenya Limited.
 Total debt British American Tobacco 2079887
 Kenya Limited.
28 Total share capital BOC Kenya Limited. 97627
 Reserves BOC Kenya Limited. 942874
 Total debt BOC Kenya Limited. 242758
29 Total share capital Carbacid Investments Limited. 47195
 Reserves Carbacid Investments Limited. 496897
 Total debt Carbacid Investments Limited. 32491
30 Total share capital Crown-Berger Kenya Limited. 107850
 Reserves Crown-Berger Kenya Limited. 452793
 Total debt Crown-Berger Kenya Limited. 371412
31 Total share capital Dunlop Kenya Limited. 50000
 Reserves Dunlop Kenya Limited. 55804
 Total debt Dunlop Kenya Limited. 27451
32 Total share capital East African Cables Limited. 101250
 Reserves East African Cables Limited. 248007
 Total debt East African Cables Limited. 70431
33 Total share capital East African Portland Cement 450000
 Company.
 Reserves East African Portland Cement 1250206
 Total debt East African Portland Cement 4090415
 Company.
34 Total share capital East African Breweries Limited. 936022
 Reserves East African Breweries Limited. 8572542
 Total debt East African Breweries Limited. 4690044
35 Total share capital Sameer Africa Limited 1391712
 Reserves Sameer Africa Limited 487999
 Total debt Sameer Africa Limited 778216
36 Total share capital Kenya Oil Company Limited 36000
 Reserves Kenya Oil Company Limited 870763
 Total debt Kenya Oil Company Limited 531056
37 Total share capital Mumias Sugar Company Ltd. 1020000
 Reserves Mumias Sugar Company Ltd. 4334095
 Total debt Mumias Sugar Company Ltd. 4861041
 Kenya Power and Lighting 1098040
38 Total share capital Company Ltd.
 Kenya Power and Lighting 4992485
 Reserves Company Ltd.
 Kenya Power and Lighting 14893983
 Total debt Company Ltd.
39 Total share capital Total Kenya Ltd. 280000
 Reserves Total Kenya Ltd. 792198
 Total debt Total Kenya Ltd. 2970396
40 Total share capital Unga Group Ltd. 234294
 Reserves Unga Group Ltd. 2274500
 Total debt Unga Group Ltd. 2921382
41 Total share capital A.Baumann & Company Ltd. 19200
 Reserves A.Baumann & Company Ltd. 433003
 Total debt A.Baumann & Company Ltd. 119653
42 Total share capital City Trust Ltd 20830
 Reserves City Trust Ltd 175214
 Total debt City Trust Ltd 24644
43 Total share capital Eaagards Ltd. 8039
 Reserves Eaagards Ltd. 176062
 Total debt Eaagards Ltd. 48222
44 Total share capital Express Kenya Ltd 24000
 Reserves Express Kenya Ltd 332199
 Total debt Express Kenya Ltd 504105

Alternative Segment (Kshs.'000')

45 Total share capital Kapchorua Tea Company Ltd 19560
 Reserves Kapchorua Tea Company Ltd 370978
 Total debt Kapchorua Tea Company Ltd 150394
46 Total share capital Kenya Orchards Ltd 3000
 Reserves Kenya Orchards Ltd -2201
 Total debt Kenya Orchards Ltd 89881
47 Total share capital Limuru Tea Company Ltd 4000
 Reserves Limuru Tea Company Ltd 27728
 Total debt Limuru Tea Company Ltd 19234
48 Total share capital Standard Newspapers Grp Ltd 64152
 Reserves Standard Newspapers Grp Ltd 27095
 Total debt Standard Newspapers Grp Ltd 356567
49 Total share capital Williamson Tea kenya Ltd 43782
 Reserves Williamson Tea kenya Ltd 1193079
 Total debt Williamson Tea kenya Ltd 446068

Agricultural Sector (Kshs.'000')

 Equity Type 2004 Change

1 Total share capital 488750 0%
 Reserves 2630036 -45%
 Total debt 2043129 160%
2 Total share capital 98000 0%
 Reserves 992350 -50%
 Total debt 1055029 24%
3 Total share capital 300000 0%
 Reserves 275807 32%
 Total debt 452854 35%
4 Total share capital 190046 0%
 Reserves 2948031 52%
 Total debt 812259 138%

Services and Commercial Sector (Kshs.'000')

5 Total share capital 58702 35%
 Reserves -11331 32%
 Total debt 19423 118%
6 Total share capital 111398 0%
 Reserves 272044 59%
 Total debt 343837 -5%
7 Total share capital 242796 100%
 Reserves 2492605 100%
 Total debt 3568440 30%
8 Total share capital 3000 0%
 Reserves 2 40,282 1322%
 Total debt 163959 -2%
9 Total share capital 2308000 0%
 Reserves 6112000 46%
 Total debt 20970000 205%
10 Total share capital 71966 -1%
 Reserves 152669 -87%
 Total debt 733483 -39%
11 Total share capital 267500 50%
 Reserves 2632700 94%
 Total debt 1192500 80%

Agricultural Sector (Kshs.'000')

12 Total share capital
 193395 0%
 Reserves
 898244 181%

 Total debt 962880 117%
13 Total share capital 300000 0%
 Reserves -190035 -143%
 Total debt 3155132 181%

Banking Sector (Kshs.'000')

14 Total share capital 2037000 32%
 Reserves 10438000 58%
 Total debt 93720000 51%
15 Total share capital 720000 44%
 Reserves 1802611 64%
 Total debt 26791536 424%
16 Total share capital 397500 25%

 Reserves 1039572 65%

 Total debt 9730651 77%

17 Total share capital 575000 0%

 Reserves 544926 -44%

 Total debt 8340706 -26%

18 Total share capital 274976 95%

 Reserves 2721562 517%

 Long-term debt 60496 76%

19 Total share capital 180000 0%

 Reserves 1913796 5%

 Total debt 7384270 148%
20 Total share capital 1996000 78%

 Reserves 6584159 -29%

 Total debt 61020008 -11%

21 Total share capital 6675000 568%

 Reserves -4050201 583%

 Total debt 27968826 10%

22 Total share capital 412073 25%
 Reserves 2231894 42%
 Total debt 13999526 157%
23 Total share capital 240000 269%

 Reserves 559144 -66%

 Total debt 2554476 170%

24 Total share capital 1359839 65%

 Reserves 4703355 48%

 Total debt 61050733 80%

Manufacturing and Allied Sector (Kshs.'000'

25 Total share capital 465000 24%
 Reserves 521188 132%
 Total debt 986764 71%
26 Total share capital 1815000 0%

 Reserves 8048000 -8%

 Total debt 4326000 326%

27 Total share capital 1000000 33%

 Reserves 2761025 -24%

 Total debt 2360862 14%

28 Total share capital 97627 0%
 Reserves 1055736 12%
 Total debt 312927 29%
29 Total share capital 56634 20%
 Reserves 696859 40%
 Total debt 186756 475%
30 Total share capital 107850 0%
 Reserves 485856 7%
 Total debt 334617 -10%
31 Total share capital 50000 0%
 Reserves 27473 -51%
 Total debt 62758 129%
32 Total share capital 101250 0%
 Reserves 215792 -13%
 Total debt 175174 149%
33 Total share capital 450000 0%

 Reserves 1352463 8%
 Total debt 5667834 39%

34 Total share capital 1098297 17%
 Reserves 12446213 45%
 Total debt 5511917 18%
35 Total share capital 1391712 0%
 Reserves 620578 27%
 Total debt 974154 25%
36 Total share capital 50398 40%
 Reserves 3 ,342,537 284%
 Total debt 2841871 435%
37 Total share capital 1020000 0%
 Reserves 4382105 1%
 Total debt 3745232 -23%
 1582560 44%
38 Total share capital
 15908659 219%
 Reserves
 14803862 -1%
 Total debt
39 Total share capital 875324 213%
 Reserves 3647427 360%
 Total debt 6026038 103%
40 Total share capital 315454 35%
 Reserves 1017360 -55%
 Total debt 2254953 -23%
41 Total share capital 19200 0%
 Reserves 245723 -43%
 Total debt 121309 1%
42 Total share capital 20830 0%
 Reserves 182757 4%
 Total debt 6488 -74%
43 Total share capital 10049 25%
 Reserves 143897 -18%
 Total debt 34377 -29%
44 Total share capital 160925 571%
 Reserves 38154 -89%
 Total debt 410729 -19%

Alternative Segment (Kshs.'000')

45 Total share capital 19560 0%
 Reserves 653085 76%
 Total debt 320388 113%
46 Total share capital 57228746 1907525%
 Reserves -52845974 2400898%
 Total debt 114535603 127330%
47 Total share capital 12000 200%
 Reserves 33937 22%
 Total debt 22753 18%
48 Total share capital 325769 408%
 Reserves -148378 -648%
 Total debt 686117 92%
49 Total share capital 43782 0%
 Reserves 2235870 87%
 Total debt 878680 97%


REFERENCES

Devonshire-Ellis, C. Shanghai & Bombay Stock Exchanges-Different Aspirations? Available online: http://www.2point6billion.com/2007/06/20/ shanghai-bombay-stock-exchanges-different-aspiration

Dickinson, J.P., and K. Muragu (1994). Market Efficiency in Developing Countries: A Case Study of the Nairobi Stock Exchange. Journal of Business Finance & Accounting, Vol 21, (1), 133-150.

Fama, E. (1970). Efficient Capital Markets: a Review of Theory and Empirical Work, Journal of Finance. Vol 25, (2), pp 383-417.

Honanhan, P. and T. Beck, (2007). Making Finance Work or Africa. World Bank, Washington D.C

Kimura, J.H and Amoro, Y (1999). Impediments to the growth of the Nairobi Stock exchange. Institute of Policy Analysis and Research, Nairobi, Kenya.

Nairobi Stock exchange (NSE), (2004). The NSE Handbook, Nairobi, Kenya

Parkinson, J.M (1984). The Nairobi Stock Exchange in the context of Development in Kenya, Savings and Development, Vol. V111 (4), 363-371

Parkinson, J.M., (1987) The EMH and the CAPM on the Nairobi Stock Exchange, East African Economic Review. Vol 3, (2), 105-110.

Shanghai stock Exchange (SSE), (2005), The SSE Fact Book, China

Yacout, N.H. (1980) Capital markets in developing countries. Unpublished PhD thesis, University of Birmingham

Wangacha, M. (2001) A survey of Enterprise Attitudes Towards Kenya's Capital Market. Institute of Policy Analysis and Research, Nairobi, Kenya

World Bank (2007), Data & Statistics: Online Available; http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/

John M Parkinson, School of Administrative Studies, York University

Nelson M Waweru, School of Administrative Studies, York University
Table 1: Stock Exchanges in (Sub-Saharan) Africa: 2005

Country: Number Market Value Turn-
 of listed Cap. % Traded over %
 firms of GDP % of
 GDP

Botswana 25 27.2 0.6 2.1
Cote d'Ivoire 39 12.3 0.3 2.5
Ghana 30 23.7 0.8 3.2
Kenya 47 26.1 2.1 7.9
Malawi (2002) 8 9.2 1.3 14.1
Mauritius 41 36.0 1.6 4.4
Mozambique 1 30.0 0.0 0.0
Namibia 13 6.9 0.3 4.7
Nigeria 207 16.7 2.3 13.9
South Africa 403 170.5 76.5 44.9
Swaziland 6 8.3 0.0 0.0
Tanzania 6 6.2 0.2 2.5
Uganda 5 1.4 0.0 0.2
Zambia 13 8.0 0.1 1.5
Zimbabwe 79 41.3 2.9 7.0

Country: Zero Concent- Number
 return ration of listed
 weeks % of firms corporate
 of total bonds

Botswana - 0.21 17
Cote d'Ivoire - 0.21 -
Ghana 70 0.12 3
Kenya 41 0.20 -
Malawi (2002) - - 0
Mauritius 48 0.12 1
Mozambique - - -
Namibia 57 0.39 4
Nigeria 67 0.08
South Africa 13 0.06
Swaziland - - 2
Tanzania - - 6
Uganda - - -
Zambia - - 0
Zimbabwe 37 0.08 -

Table 2: Agricultural sector (Kshs. million)

Equity type 1998 2004 Change Percentage
Share Capital 1077 1077 0 0%
Retained earnings 8936 6846 2090 (23.4%)
Debt 2309 4363 2054 88.9%
Total assets 12321 12286 36 (-3%)

Table 3: Commercial and Services Sector (Kshs. million)

Equity 1998 2004 ChangePercentage

Share Capital 3331 3557 226 6.7%
Retained Earnings 7467 12599 5132 68.7%
Debt 13608 31110 17502 128.6%
Total Assets 24406 47266 22860 93.7%

Table 4: Banking and Financial Services Sector
(Kshs. million)

Equity 1998 2004 Change Percentage

Share Capital 6598 14,867 8,269 125.3%
Retained Earnings 26595 28,488 1,893 7.1%
Debt 210155 312,591 102435 48.7%
Total Assets 243,349 355,947 112598 46.3%

Table 5: Industrial and allied Sectors (Kshs. million)

Equity 1998 2004 Change Percentage

Share Capital 8862 10688 1826 20.6%
Retained Earnings 50154 57139 6985 13.9%
Debt 40851 51144 10293 25.2%
Total Assets 99,868 118972 19104 19.2%

Table 6. The Alternative segment (Kshs. Million)

Equity 1998 2004 Change

Share Capital 134 57629 57495
Retained Earnings 1616 -50071 -49909
Debt 1062 116443 115381
Total Assets 2813 124001 121188

Table 7: Summary of the Main Market Segment

Equity 1998 2004 Change % of total assets

Share Capital 19868 30189 10320 6.6%
Retained Earnings 93,150 105074 11923 7.7%
Debt 266923 399,209 132285 85.7%
Total Assets 379942 534472 154529 100%
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Author:Parkinson, John M.; Waweru, Nelson M.
Publication:Journal of International Business Research
Geographic Code:1USA
Date:Jul 1, 2008
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