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 a company to qualify for listing. Some companies have considered this prohibitive.

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