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.

Background Information 
Many companies depend on equity capital to finance their businesses. A company will raise equity capital through the sale of its stock to the public by listing on a stock exchange through an Initial Public Offer (IPO). Through an IPO a company will be valued and an opening price will be set for its shares. The amount of capital that can be raised through the IPO will depend on perceived value of the shares and also on how much interest there is by investors in the shares when they are issued. An IPO will offer a company that has reached a certain size and has a strong reputation, a good route to raising a large sum of capital that will enable it to expand or invest in assets that will enable it to grow in the future. Another advantage of going public is that it results in share liquidity. Shares are considered liquid if they can be easily converted into cash. An IPO leads to share liquidity because, thereafter, the company's shares will trade on a public market, in this case the Nairobi Securities Exchange. 

The Nairobi Securities Exchange 
The Nairobi Securities Exchange (NSE) offers a platform for companies to list their shares in Kenya. The NSE was formed in 1954 and is one of the most active capital markets in Africa and the fourth largest Sub-Saharan Africa security exchange with 61 listed companies and 21 brokerage firms. Trading takes place on Mondays through Fridays between 10.00 am and 3.00 pm. NSE was a regional security market up to 1972 when it lost its regional character following the nationalization, exchange control and other inter-territorial restrictions introduced in neighbouring Tanzania and Uganda. Currently the ceiling on foreign investments is 40% for institutions and 5% for individuals (Mwanza, 2006). The Security Exchange was characterized by low activity until the 1990‟s. The most spectacular performance was exhibited in 1994 when the turnover rose by 620% from Kshs 378 million in 1992 to Kshs 2.7 billion in 1994. Over the same period, the traded volume increased by 180% from 15.3 million shares to 42.8 million shares. Due to share price appreciation, market capitalization surged from kshs 25 billion to Kshs 137 billion during the period, (Mbaru, 2007). Over the last 10 years, turnover at the NSE has grown phenomenally from Sh2.9 billion in 2002 to Sh95 billion in 2006 and Sh395 million daily in 2012. The Capital Markets Authority, in its 2013-2017 strategic plan, put the target for a combined bonds and equities turnover at Sh1.04 trillion for 2013, rising to Sh6.83 trillion in 2017. While the number of CDS accounts that have been opened have increased from 80,000 in 2005 to about 1.9 million accounts to date (CMA, 2013). 

The NSE successfully installed a Central Depository System (CDS) in November 2004 and an Automated Trading System (ATS) in November 2006 (Onyuma et al., 2012). The CDS ensures that delivery and settlement is done script less while the ATS ensures that orders are matched automatically and are executed on a first come first serve basis. The NSE is regulated by the Capital Markets Authority (CMA) under the jurisdiction of the ministry of Finance. The 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 and has the following as its goals; to achieve a large and efficient capital market, allowing for wider diversification of risks and greater and more efficient allocation of resources, develop adequate regulations that provide the market with freedom for development and help protect investors and markets from financial fraud and crimes, to develop a deep and vibrant capital market through education of investors. In addition it stresses on good corporate governance to influence entry of investors into the capital markets as this gives investors confidence (CMA, 2012). 

According to Stulz (1999) when firms decide to cross-list, there are certain things they need to have ready. These include the presence of an independent board of directors to ensure that the global investors will have confidence that management will properly utilize the resources injected in the firm. Secondly, the firm must receive certification in the capital markets. Securing highly reputed investment banks will help the firm secure the lowest issue costs. Thirdly, legal protection of the minority shareholders to ensure that their rights are not over stepped. Lastly, the firm must abide by the stringent disclosure requirements set by the Security Exchange. 

For a company that is already listed on an exchange, an alternative route is to cross list. Cross listing is where a firm lists its shares for trading on at least two stock exchanges located in different countries. During the period 1986 to 1997 cross listing happened on the following stock exchanges: Amsterdam, Brussels, Frankfurt, London, Madrid, Milan, Paris, Stockholm, Vienna, Easdaq, Amex, Nasdaq, and NYSE.14 Since until November 1998 European companies could not list their shares directly on U.S. exchanges, all the cross-listings on U.S. markets in by European companies were effected via American Depository Receipts (ADRs). ADRs are issued by a U.S. depository bank and represent shares held overseas. They confer to their holders the same income and voting rights as the underlying shares and trade in the United States like other securities, although a small fee per share must be paid to the depository bank for each trade and when dividends are cashed (Halling 

Cross listing has gained significance over the past few years since the signing of the East Africa Community treaty in 1999. The geography of cross listing has changed considerably with Nation Media Group, Kenya Airways, Kenya Commercial Bank, Jubilee Holdings, Equity Bank, Centum Investments and East African Breweries, which are Kenyan firms, listing in Uganda, Tanzania and Rwanda (Mwanza, 2006). 

Eight (8) firms have cross listed from the NSE to other markets in the region (Appendix 1). Listing on NSE provides qualifying companies with the broadest access to investors, greatest market depth and liquidity, cost-effective access to capital, highest visibility, fairest pricing, and investor benefits. 

Cross border listing in East Africa has been used by regionally recognized firms such as, Kenya Airways and East African Breweries Limited to increase their visibility and distinguish themselves from others. However this trend has changed with more firms cross listing such as Nation Media Group and Equity Bank which are cross listed in the Dar es Salaam Stock Exchange (DSE) and Uganda Securities Exchange (USE) respectively citing more monetary and non-monetary benefits that will accrue to them if they cross list in the East African Community (EAC) market. 

When firms cross list and sell their shares in a foreign market they aim to accrue some of the benefits as observed by Romana (2006), they include improving the liquidity of its existing shares and support a liquid secondary market for new equity issues in foreign markets. Firms from countries with small illiquid capital markets often outgrow those markets and are forced to raise new equity abroad. In order to maximize liquidity, the firm ideally should cross-list and issue equity in a more liquid market, secondly, firms will cross list to increase its share price by overcoming mispricing in a segmented and illiquid home capital market, thirdly, is to increase the firm‟s visibility and political acceptance to its customers, suppliers, creditors, and host governments. Listing in the foreign markets brings the opportunity to enhance corporate image, advertise trademarks and products, get better local press coverage, and become more familiar with the local financial community in order to raise working capital locally, establish a secondary market for shares used to acquire other firms in the host markets, i.e. companies offer their shares as partial payment and it is considerably more attractive if those shares have a liquid secondary market (Romana, 2006). 

The EAC is the regional inter governmental organization of the Republics of Kenya, Uganda, the United Republic of Tanzania, Republic of Rwanda and Republic of Burundi with its headquarters in Arusha, Tanzania. The treaty of establishment of the East African Community (EAC) was signed on November 1999 and entered into force on 7th July 2000 following it‟s ratification by the original three partner states, Kenya, Uganda and Tanzania. The Republic of Rwanda and Republic of Burundi acceded to the EAC treaty on 18th June 2007 and became full members with effect from 1st July 2007. 

The EAC market currently has four securities exchanges which include the Nairobi Securities Exchange (NSE), Uganda Securities Exchange (USE), Dar es Salaam Stock Exchange (DSE) and Rwanda Stock Exchange (RSE). The NSE is the largest securities exchange in East Africa as discussed earlier. The DSE is the second largest securities exchange in EAC which was incorporated in September 1996 and trading started in April 1998. Trading takes place weekly from Monday to Friday between 10:00 am and 12:00 noon. It is monitored and supervised by the Capital Markets and Securities Authority (CMSA). There are currently twenty listed firms of which six firms have cross listed from the NSE to the DSE, including Nation Media Group, Kenya Airways, Kenya Commercial Bank, Jubilee Holdings, East African Breweries, and Uchumi supermarket in 2014. 

The third securities exchange in the EAC is the USE founded in June 1997. It is operated under the jurisdiction of Uganda‟s CMA which in return reports to the Bank of Uganda. The exchange opened for trading in 1998 and trading occurs Monday to Friday. There are currently 16 listings, seven of which are cross listed from the NSE, they include, Nation Media Group, Kenya Airways, Kenya Commercial Bank, Jubilee Holdings, East African Breweries, Equity Bank, Centum Investment Company Limited and Uchumi Supermarkets. Umeme with a primary listing in the USE cross listed to the NSE in 2013. 

The Rwanda Stock Exchange is the youngest Stock Exchange in the region and opened for business on 31st January 2011 succeeding from the operations of the Rwanda over the Counter Exchange (ROTCE) opened in January 2008. There are currently 2 firms cross listed from the NSE; Nation media Group and Kenya Commercial Bank in 2009 and 2010 respectively (Onyuma et al, 2012), Uchumi Supermarkets has also cross listed to the RSE. The integration of East African Stocks has eased and encouraged firms to cross list in the region which will be finalized once the appropriate regulatory framework is in place. The markets in the region aim to facilitate the availability of listed securities in the four markets and cross listing is seen as a key activity to achieving this objective. 

Liquidity refers to the ease of dealing in a security whether shares, options, warrants or some other instrument and turning them into cash. It can also refer to how easily shares can be bought and sold without significantly distorting the price. There are a number of different reasons as to why firms cross list from the domestic market according to Rosenboom and Van Dijk (2009), which includes market liquidity where cross listing on deeper and more liquid equity markets could lead to an increase in the liquidity of the stock and a decrease in the cost of capital. 

Liquidity is seen as a major motivator for firms to cross list. This is because before cross listing the firm has to contend with the liquidity in the home market which may not satisfy the firm‟s financing needs. Mittoo (1992) indicates that managers of overseas companies indeed cite increased liquidity through increase in traded volume as a primary factor in their decision to list in the U.S.; this is no different in the EAC market. With mass cross listing taking place in East Africa cross listing firms will be interested to know whether they will achieve this objective by cross listing. 

Shares listed in the NSE may become illiquid after trading for some time in the home market, the firms cross list in other markets in the EAC to try to make their shares more liquid and attract new investors. With liquidity being a major motivator for firms to cross list, a study focusing on the impact of cross listing on share liquidity in the EAC becomes necessary.

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