The aim of the study was to identify the effects of cross-border listing on firm‟s financial performance of listed Kenyan-based companies on the East African Bourse. However, there is scanty empirical evidence on the effects of cross-border listing on a firm‟s financial performance since this is an emerging trend in developing economies. Every company requires funds to meet its financial obligations. The most common source of funds remains equity, which is raised through financial markets. As firms forge cross-border in investment lack of information on the factors that are worth addressing and the effects of expanding across the borders becomes a major constraint in strategic planning and predictable success of the firms. Thus, a need to identify constraints and effects of cross listing become instrumental in the global financial economy. Following on the above dilemma, this study had the main objective of determining the effects of cross listing on firm‟s financial performance by listed Kenyan companies. The study focused on cross-listed firms and a similar number of non cross-listed in similar sub-sectors. The non cross-listed were selected using purposive sampling method. The study covered the pre and post-listing financial performance of the firms two years before and after cross listing. Two of the cross-listed firms were excluded in the study because their duration was less than two years. Secondary data was collected and analyzed from published financial reports, which were obtained from Capital Markets Authority (CMA). Karl Pearson‟s correlation co-efficient and t test (one and two tailed) were used to test for relationships of the financial ratios computed. Most of the results were not statistically significant. Liquidity improved for most of the firms apart from the results of one; most had a t value greater than 3 and a p value less than 0.03. profitability of most firms also increased after they cross-listed. When firms raise capital through cross listing, their EPS reduces due to the dilution effect. From data analyzed, it was found that all firms in similar sub-sectors were highly interlinked since all had a correlation greater than 0.6. In all the cross-listed firms, the majority shareholders owned more than 25% but less than 49% of shares thus implying being associates. When firms cross-list, their P/E ratio increase; this could translate to goodwill that investors place on the firm thus having patience to wait for their returns. The findings of the study will be expected to help the investing public and decision makers to be more enlightened on cross listing issues. The study will also be expected to add knowledge on existing literature since much has not been done in this area.

Background of the Problem 
Businesses require resources to enable them serve the needs of their customers effectively. This implies that their owners have to go an extra mile to source the funds necessary to sustain their customers. The most common types of long-term financing in Kenya include long-term debt, common stock, preferred stock and retained earnings. Thus, firms may borrow or use their available savings. However, as they continue to expand they resort to borrowing. Equity or debts are the only options at their disposal but most prefer to use equity because it forms a permanent source of funding that cannot be easily redeemed. When firms raise equity they may raise it within their own boundaries, or go beyond their national boundaries. The former is referred to as listing, while the latter is known as cross listing. Listing is the admission of a company into a stock market after meeting certain regulatory requirements set by the regulatory authority of that particular country. For a company to be listed it has to be a public company. 

The stock market in Kenya is known as the Nairobi Stock Exchange (NSE). Constituting a voluntary association of stockbrokers, the NSE was formed in 1954. It has had a remarkable development to become amongst the most vibrant stock markets in Africa. According to NSE website, its market capitalization saw tremendous improvement hitting Ksh. 1.3 Trillion after listing of Safaricom Ltd. Over the last 5 years, turnover at the NSE has grown phenomenally from Sh2.9 billion in 2002 to Sh95 billion in 2006 while the number of CDSC accounts that have been opened have in the last 2 years increased from 80,000 in 2005 to over 1,000,000 investors to date ( Currently, there are 55 stocks listed in the NSE, out of which 51 are actively traded. In the Commercial & Services sector, the stocks of Uchumi Supermarkets Ltd and Hutchings Biemer were suspended from trading. In the AIMS (Alternative Investments Markets Segment) Kenya Orchards and A Baumann & Co. Ltd have been suspended. NSE has continued to play an important role in economic development, especially concerning its role in financial intermediation. Securities traded at NSE are bonds and shares that constitute the markets two broad segments. The stock market is referred to as Floating Interest Rates market, which is divided into two segments; the Main Investments Market Segment (MIMS) & Alternative Investments Market Segment (AIMS). MIMS has four segments namely Agricultural, Commercial and Services, Finance & Investment, and Industrial & Allied sector. Characterized by its liquidity, market capitalization and turnover, the NSE may be classified as both emerging market and frontier market (Muhanji, 2000). NSE is a model emerging market in view of its high returns, vibrancy and well developed market structure (Ogum et al, 2000). It is among the most vibrant African Bourse, and is the most developed security market in Eastern Africa. In the year 2009, the bourse introduced a market indicator named as the NSE All Share Index (NASI). Thus, it raises interest and sets a precedent for comparison with other emerging markets in Africa and the world at large (Nyambura, 2005). 

CMA strives to ensure that companies disclose to investors all they need to know before admitting them to the bourse and on a continuous basis after listing. According to the CMA Act Cap 12(2) (d), a securities exchange shall within four months after end of a financial year make available to the authority and to the investors, a summary of information on companies listed at the securities exchange (Chebii, 2006). A stock exchange will be required by the regulatory authority to furnish information regarding a firm‟s Earning Per Share (EPS), Dividend Per Share (DPS), shareholding structure (institutional, retail and foreign investors), major shareholders and total number of shareholders. The integration and associated globalization of capital markets has opened up a vast array of new sources and forms of project financing. Today‟s corporate treasures can access foreign capital markets as easily as those at home (Levi, 1996). Cross-border listing is listing of securities in a local exchange by a foreign-based company. Shares ought to be issued in the country in which the best price can be achieved, net of issuing costs. Where issuing costs are the same the company should list in a country where expected equity rate of return is lowest. If all markets were fully integrated, the expected cost of equity capital will be the same every country. When capital markets are segmented, as it is the case today, expected returns on the same security are different in different markets (Levi, 1996). It is due to capital-market segmentation, companies find it more advantageous to issue shares simultaneously in two or more countries‟ equity markets. 

There have been limitations in the stock markets such as; static demand and supply of stocks over long periods of time, capital constraints which have delayed their growth potential and legal impediments that confine companies to their home country boundaries as far as raising funds is concerned. Most emerging stock markets, like in Kenya, are highly concentrated. This makes them undeveloped, small and illiquid, thus exhibiting pricing volatility and error. When a firm is unable to raise extra capital outside its boundaries, and it has exhausted available local resources, its growth potential grows dim. Low growth potential reduces profitability, and as a result, unemployment is likely to increase. This is not good for any economy. When firms decide to cross-list (Stulz, 1999), there are certain things they need to have ready. First, there must be a presence of an independent board of directors. This ensures that in the global markets, investors will have confidence that management will properly utilize the resources injected into the firm. Secondly, the firm must receive certification from the capital markets. Securing highly reputed investment banks will help the firm secure the lowest issue costs. Thirdly, there has to be a legal protection of the minority shareholders. The firm must ensure that the rights of the minority shareholders are not over stepped. Lastly, the firm must abide by the stringent disclosure requirements. Cross listing on a market with strict rules is one way of making companies more committed and have more disclosure. From historical records, it can be established that Kenyan based companies that have undertaken cross-border listing have strong financial base. This is in respect to profitability, branch networking, and good growth potential. However, it has not been established empirically what the real effects of cross-border listing on a firm‟s financial performance are.

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