The Initial Public Offering Decision: A Survey of Kenya Corporate Finance Officers

Abstract

One of the most momentous events in the life of corporations is “going public”. The decision to list/ or not, cannot be generalized into one single determinant for all companies: different firm characteristics and external environment attributes play a role in the choice of the better option. This paper examined the variables influencing the decision of Kenyan CFOs to conduct an IPO or to remain private. The IPO CFOs view point revealed that the most common reason for conducting an IPO at NSE was to meet financing needs, followed by the impetus given by favourable market conditions, and lastly, as an exit strategy that enables founder entrepreneurs to liquidate their investments. The quest to reduce cost of capital received less weight as an IPO motivator. When the impediments to going public were evaluated, it was the view of the non-IPO CFOs that the desire to maintain decision making control was the most critical justification. The second most common deterrent to IPO launch was the prevailing bad market conditions. The need to avoid EPS dilution, and regulatory and reporting requirements were viewed as less critical disincentives.

Keywords: Initial public offering, IPO determinants, Remaining Private, Kenya