The Moderating Effect of Automation on Firm Specific Factors and Performance of Initial Public Offering Stocks at The Nairobi Securities Exchange In Kenya

Abstract

Abstract Performance of IPO stocks depicts two anomalies: initial underpricing and long run underperformance. A plethora of studies have established the causes of these IPO puzzle to include information asymmetry, institutional ownership, IPO size, market volatility, the intrinsic value of the IPO and issue characteristics among others. None of these studies on IPO performance as far as research has shown considered moderating effect of automation of securities market on firm specific factors. Kenya’s equity market capitalization has been on a downward trend being surpassed by fixed income securities. IPO stocks performance offer long-term as well as short-term capital to companies. This study attempts to establish whether there is a nexus between NSE automation and firm specific factors regarding performance of IPO stocks at NSE. Longitudinal and descriptive study designs were used on the secondary panel data. Multiple linear regression was used to analyze the data with Stata statistical software. The Hausman test was used to determine between fixed and random effect model. The results showed that automation had negative correlation with firm age and positive correlation with firm size. The study will assist the Kenyan government in developing financial stability measures and investors in making informed decisions. Keywords: Automation, Firm specific factors, Initial Public Offerings, Nairobi Securities Exchange.