The Key Reasons for Cross - Listing in East African Stock Exchanges by Firms Listed in the Nairobi Securities Exchange

Waweru, Kennedy Munyua; Pokhariyal, Ganesh P.; Mwaura, Muroki F.; Waweru, Munyua

doi:10.5539/ijbm.v7n16p118

Cited by 2 publications

(2 citation statements)

References 33 publications

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“…Findings from Outa (2011) indicate that IFRS adoption for NSE listed firms only marginally increased the accounting quality and even decreased the accounting quality of these firms. Waweru et al (2012) found that cross listed companies were valued higher than their domestic counterparts. Onyuma et al (2012) found that cross listing highly boosted investor confidence in East Africa.…”

Section: Research Problemmentioning

confidence: 99%

The Effect Of Cross Listing On The Accounting Quality Of Firms Cross Listed In East African Markets

Ndirangu

Iraya

2016

ESJ

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Cross listing has been identified as a determinant of accounting quality. Prior empirical studies have differed on the effect of cross listing on accounting quality in different jurisdictions. The study of accounting quality in East Africa has however not incorporated the possible effect of cross listing. This research study sought to establish the effect that cross listing may have on the accounting quality of firms cross listed in East African stock exchanges. The study looked at three accounting quality metrics of firms cross listed in East Africa, namely, earnings management, timely loss recognition and value relevance of accounting information. The earnings management model used was the Lang, Raedy and Yetman (2003) earnings smoothing model. Timely loss recognition was investigated using the Basu (1997) model while value relevance was tested using the Lang, Raedy and Yetman (2003) model. These metrics were tested for differences during a three year period prior to cross listing and a three year period after cross listing. Accounting quality metrics for a total of six cross listed East African companies were analyzed. This study shows that earnings management did not occur around the cross listing dates. The value relevance of information presented by the cross listed firms did not change significantly, meaning that the ability of the summary accounting measures to accurately reflect the underlying economic value of the firms studied still remained as before the cross listing. There was no significant effect in terms of timely loss recognition in light of bad news and no indication of better prudence in the reporting of good news. The study finds that cross listing does not have an effect on the quality of reporting of firms cross listed within the East African Securities Exchanges.

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Section: Research Problemmentioning

confidence: 99%

The Effect Of Cross Listing On The Accounting Quality Of Firms Cross Listed In East African Markets

Ndirangu

Iraya

2016

ESJ

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“…Following the same line of thought, Lin (2011) highlights the various benefits associated with exchange listing, which potentially outweigh the compliance costs. Additionally, Waweru, Pokhariyal and Mwaura (2012) in a descriptive research design, find that the key reasons for cross-listing are: investor recognition, expansion of business, the boost in shares, and the desire to lower the cost of capital. Beyond these strategic issues, from the financial standpoint there has been a large body of research regarding how cross-listing impacts the stock price on different dimensions.…”

Section: Introductionmentioning

confidence: 99%

The implicit impact of cross-listing on stock prices: A market microstructure perspective – The case of Latin American markets

Vázquez

Jiménez

2016

Contaduría y Administración

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The objective of this research is to evaluate the unobserved effect of cross-listing on stock prices of companies from Latin America. Particularly, we study the impact of the issuance of ADRs on volatility and efficiency in the local markets. We employ GARCH models to assess the impact on volatility, once the ADR has been issued, and ARMA models to evaluate the impact on efficiency, once the ADR is listed. Overall, we find that in 82% of the analyzed cases, at least one result shows improvement (i.e. lower volatility and/or more efficiency, once the corresponding ADR has been issued). Further, we find that once the electronic trading systems are implemented in emerging markets, there is an improvement in terms of the information environment, thus reducing the effects of cross-listing. This study contributes to the financial literature because it tests the impact of cross-listing on two specified market microstructure variables, namely volatility and efficiency, through a robust methodology. All Rights Reserved ResumenEl objetivo de esta investigación es evaluar el efecto no aparente sobre los precios accionarios de Latinoamérica en el momento de emitir ADRs. En particular, se estudia el impacto sobre la volatilidad y la eficiencia en los mercados locales, empleando modelos de la familia GARCH, para medir el impacto sobre la volatilidad, y modelos ARMA, para evaluar el impacto sobre la eficiencia. En general, se encontró que en el 82% de los casos analizados, al menos un resultado muestra mejora (esto es, decremento en la volatilidad y/o mejora en la eficiencia). También se encontró que una vez que los sistemas electrónicos, para comprar y vender activos, son implementados en los mercados bajo estudio, hay una mejora en el ambiente de información, por lo que se reduce el efecto de emisión de los ADR. Finalmente, este estudio contribuye a la literatura financiera porque evalúa el impacto de la emisión de ADR sobre 2 variables específicas de la microestructura de los mercados financieros, volatilidad y eficiencia, mediante el uso de metodologías estadísticas consistentes. Derechos Reservados © 2015 Universidad Nacional Autónoma de México, Facultad de Contaduría y Administración. Este es un artículo de acceso abierto distribuido bajo los términos de la Licencia Creative Commons CC BY-NC-ND 4.0.Palabras clave: Enlistar en el extranjero; Ambiente de información; Microestructura; Volatilidad y eficiencia

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The Key Reasons for Cross - Listing in East African Stock Exchanges by Firms Listed in the Nairobi Securities Exchange

Cited by 2 publications

References 33 publications

The Effect Of Cross Listing On The Accounting Quality Of Firms Cross Listed In East African Markets

The Effect Of Cross Listing On The Accounting Quality Of Firms Cross Listed In East African Markets

The implicit impact of cross-listing on stock prices: A market microstructure perspective – The case of Latin American markets

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