Explain 5 roles of the Nairobi Stock exchange
1. Facilitating capital raising: One of the primary roles of the Nairobi Stock Exchange is to provide a platform for companies to raise capital by issuing shares to the public. This enables businesses to fund their expansion and growth plans through investment from shareholders.
2. Providing liquidity: The Nairobi Stock Exchange provides a secondary market where investors can buy and sell shares of listed companies. This liquidity allows investors to easily buy and sell their investments, providing market participants with the ability to convert their holdings into cash when needed.
3. Price discovery: The Nairobi Stock Exchange plays a crucial role in determining the fair market value of listed companies through the constant buying and selling of shares. Price discovery helps investors make informed decisions about their investments and ensures that the market reflects the true value of company shares.
4. Enhancing corporate governance: Companies listed on the Nairobi Stock Exchange are required to adhere to strict regulations and disclosure requirements. This helps to promote transparency and accountability in corporate governance practices, ultimately benefiting investors and the overall market integrity.
5. Market benchmarking: The performance of the Nairobi Stock Exchange is often used as a benchmark to gauge the overall health and performance of the Kenyan economy. Investors, policymakers, and analysts closely monitor the stock exchange to assess the economic conditions and make informed decisions about investments and policy-making.