Participation of private sector companies in emerging capital markets: A study of capital markets in Tanzania.

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Mzumbe University
This study aimed at determining factors influencing participation of private sector companies in Tanzanian emerging capital market. The study answered the question on the relationship between a company‟s going public decisions on the one hand and going public rules and regulations (which include ordinance compliance requirements, prospectus information disclosure and external monitoring and corporate governance), going public costs, company‟s confidentiality, company‟s reputation and credibility, and company‟s portfolio diversification to allow risk sharing on the other hand. The testable hypotheses were formulated as follows: (i) Going public rules and regulations are negatively associated with company‟s decision to go public; (ii) (iii) (iv) (v) Going public costs are negatively associated with company‟s decision to go public; Company‟s confidentiality syndrome is negatively associated with company‟s decision to go public; Company‟s reputation and credibility is positively associated with company‟s decision to go public; and, Company‟s portfolio diversification to allow risk sharing is positively associated with company‟s decision to go public. The study adopted a survey design using a cross-sectional approach. The sample size comprised of 168 private profit making companies from three regions of Tanzania mainland, namely Arusha, Dar es Salaam, and Kilimanjaro. The three regions were selected because they account for over 61% of all private profit making and non-profit making companies in Tanzania mainland (CRE, 2007). Data analysis used the Statistical Package for Social Sciences (SPSS) software and applied a multiple linear regression analysis (MLRA) model, using the ordinary least square (OLS) estimation technique. Findings of the study had mixed support for the hypotheses. Four predictor variables which slightly supported the hypotheses are: portfolio diversification to allow risk sharing; external monitoring and corporate governance; company‟s confidentiality and prospectus information disclosure requirements. Surprisingly enough, company‟s control variables did not support our hypotheses. The actual results of the study revealed that, empirical support came from company portfolio diversification to allow risk sharing, prospectus information disclosure requirements, company reputation and credibility and company confidentiality. On the other hand, results revealed there was no empirical support for going public costs, while going public ordinance compliance requirements was only slightly supported. The study recommends measures which will enhance capital markets policy interventions. First, are measures to be instituted by policy makers to increase supply of and demand for security instruments and to strengthen the regulatory operating capacity. Second, are training and research measures which will enable Capital Markets and Securities Authority (CMSA), in collaboration with Dar es Salaam Stock Exchange (DSE), training and research institutions, to develop and promote new market strategies, such as curricular programmes to enhance the public‟s awareness of capital markets. Last, but not least, the study recommends strategic measures to private sector companies which will enhance their incentives to save, and mechanisms to channel those savings into further investments. Finally, the study suggests directions for future research on capital markets participation in emerging markets and Tanzania in particular.
A dissertation submitted in partial fulfillment of the requirements for award of Degree of Doctor of Philosophy of Mzumbe University.
Private sector companies, Emerging capital markets, capital markets in Tanzania