Adoption of Equity Derivative Markets in Kenya

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dc.contributor.author Kinyua, Kelvin Mugambi
dc.date.accessioned 2015-05-06T13:59:57Z
dc.date.available 2015-05-06T13:59:57Z
dc.date.issued 2014-08
dc.identifier.uri http://erepo.usiu.ac.ke/11732/127
dc.description A project Report submitted to the Chandaria School of Business in Partial Fulfilment of the Requirement for the Degree of Masters in Business Administration (MBA) en_US
dc.description.abstract The purpose of the study was to establish the perceived benefits derived from the equity derivative market, the critical success factors that might affect the adoption of efficient and successful equity derivative markets and the measures that could be adopted for a successful equity derivative market in Kenya. The descriptive and inferential study design was applied to a target population of 19 NSE member firms as well as CMA staff. Data was collected by use of questionnaires in May and June 2014. The data was analysed by use of descriptive statistics and inferences drawn by use of correlation analysis. Data was presented by use of tables and graphs. The findings indicate that equity derivatives would create efficiency in the capital markets especially due to the increased market scrutiny, price discovery mechanisms for the underlying equity instruments as well as boost fund performance. Additionally the financial instruments would increase investment opportunities both in the local domain and the international financial market. Consequently the instruments would reduce market transaction costs and investor risks as well as market volatility. Equity derivatives would offer employment opportunities, increase scrutiny in the capital markets thus fostering fair transactions, offer a variety of investment opportunities to investors as well as increase stability and liquidity in the capital markets. The most prominent challenge posed by the introduction of equity derivatives would be market capitalization, market turnover especially on the levels of liquidity. In addition the complex nature of the instruments would require skilled personnel in the sector, unfortunately a deficiency in skilled personnel was a challenge foreseen. The monetary and fiscal policy in their current state would not be efficient in the handling of the market. Additionally, the lack of good political resolve would’ve impeded the development of the equity derivative market coupled with single ownership and dispute resolution mechanism; unless these were resolved the equity derivative market would not thrive. The measures that needed to be set up prior introduction of Equity derivatives were; training of derivatives handlers and the sensitization of the investors. There was a crucial need to enact specific laws in a bid to foster investor trust. Full demutualization of the market as well as formation of joint ventures was crucial in that it was bound to promote investor trust and benefit from information and physical hardware respectively. Full information disclosure was vital for the market growth. In addition there was a need to cultivate good political will to foster investments as well as creating autonomy in the supervisory body mandated with policing this specific market. The recommendations from the study were; a need for government intervention to create awareness to investors and foster the training of investment advisors, the government also needed to set up sound financial infrastructure especially in the monetary and policy frameworks in a bid to influence the macro-economic policies and consequently have an increase in local investments as well as foreign investments, the need for enactment of laws specifically targeting equity derivative markets as well was a major factor that needed to be addressed before the establishment of the equity derivative market. en_US
dc.publisher United States International University - Africa en_US
dc.subject Equity Derivative Markets en_US
dc.title Adoption of Equity Derivative Markets in Kenya en_US
dc.type Thesis en_US

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