Highlight four factors that may underlie the low rate of listing of companies in a stock exchange you are familiar with.

CPA-Financial-Management-Section-3 Revision kit

Factors underlying the low rate of listing or companies in a stock exchange:

• Undervalued shares
Due to market inefficiency the shares of the companies are at times undervalued based on the market value. This leads to low market value of the company.

• Listing requirement

Stringent conditions have to be met by a company to qualify for listing. Some companies have considered this prohibitive.

• Compliance measures
Strict rules and regulations must be complied with by the quoted companies. There exists continued scrutiny and surveillance of the quoted companies by the Capital Market and the Nairobi Exchange.

• Lack of privacy
A lot of information needs to be disclosed for the quoted companies. The companies are subjected to a lot of public scrutiny. Prospective companies may fear loss of privacy associated with listing.

• Limited and public company requirement.
Only limited and public companies are allowed for listing. A number of companies are private companies and may therefore not qualify.

• Cost of risking – high level of listing (before)

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