Factors Affecting Post-Initial Public Offer of Listed Companies at the Nairobi Securities Exchange
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 11
Abstract
Initial Public Offerings (IPOs) have recently become popular as way of sourcing for funds by organizations and to the investors by buying shares in those companies. However, IPO can be a risky investment avenue because of uncertainty regarding the future prices of post IPO shares. The purpose of this study was to establish the factors affecting post-initial public offer share price in Kenya. The study was guided by the following specific objectives: to establish the effect of company information on the post IPO share prices in the securities market; to examine how inflation rate, influence post IPO share prices in the market; to evaluate how dividend policy influence post IPO share prices; and to determine how the number of shares issued affect the post-IPO share prices. The study was guided by five hypotheses namely the Winner’s Curse Hypothesis, Signaling Hypothesis, The Market Feedback Hypothesis, The Lawsuit Avoidance Hypothesis and the Fads Hypothesis. The study was based on a correlational research design. The study population consisted of 64 listed companies at the NSE. The study targeted 23 companies listed during the study period. Nassiuma’s (2006) formula and simple random sampling was used to obtain 9 companies. Purposive sampling was employed to select 86 senior finance officers as the study respondents. Data was collected using questionnaires. Descriptive and inferential statistics were used to analyze data with the aid of Statistical Package for Social Sciences (SPSS). Descriptive statistics included frequencies, percentages, mean and standard deviations. Correlation analysis and regression analysis were used to establish the relationship between study variables. The findings indicated that post IPO share prices were influenced company information, inflation rate, dividend policy and the number of share issued among companies listed in the NSE. From the findings, the study concluded that 27.4% of post IPO share price of listed companies influenced by company information; 30.3% by inflation rate, 21.5% by dividend policy and 20.1% by the number of shares issued. In general, the study concluded that the number of shares issued, inflation rate, dividend policy and company information accounted for 61.3% of the total variance in post-initial public offer share price. The study recommended that listed companies should become more proactive in adapting to changing dynamics of post IPO share prices.
Authors and Affiliations
DorcasNdinda Mutuku, Dr. Julius Bichanga, Dr. Irene Asienga
Keywords
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- EP ID EP416269
- DOI 10.9790/487X-2011024158.
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