REGULATION FRAMEWORK AND THE GROWTH OF THE STOCK...

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REGULATION FRAMEWORK AND THE GROWTH OF THE STOCK MARKET

A CASE STUDY OF UGANDA SECURITIES EXCHANGE LIMITED (USE)

BY

NJENGA WAIRIMU PERIS

07/K/3360/EXT

A RESEARCH REPORT SUBMITTED TO MAKERERE UNIVERSITY IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE BACHELOR OF

COMMERCE DEGREE OF MAKERERE UNIVERSITY..

JUNE. 2011

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DECLARATION

I, NJENGA WAIRIMU PERIS, declare that this is my original piece of work. It has never been

presented to any institution for any academic award. Where work of another individual has

been used, acknowledgement has been duly given

Signature…………………… Date …………………………….

NJENGA WAIRIMU PERI

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APPROVAL

This is to certify that this research report titled “Regulation framework and the growth stock

market. ” has been under my supervision as the University Supervisor.

Signature: ……………………………. Date: ……………………

MR. MUSIME GRACE.

(SUPERVISOR)

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DEDICATION

I dedicate this project to my parent Mr.Evans.W.Njenga and Mrs. Jane Wanjiku for their

financial support, siblings Leonard Muraya, Martin Ngugi, Joseph Muruku and dad Dickson

with love and gratitude and all those who have made an impact in my life to make it what I am

today.

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ACKNOWLEDGEMENT

I would like to thank the almighty God for the gift of life and guiding me throughout my

education and this research for his mercy was always with me.

My heartfelt gratitude goes to my family for their tireless effort, financial support, parental

love, and guidance and for believing in me all throughout my education.

Special thanks go to my supervisor Mr.Musime Grace for guiding me throughout the research. I

am proud to have been under your tutorship. I also thank all my lecturers who have enabled me

acquire immeasurable knowledge.

Lastly I thank all my friends Moses, Maryann, Patrick, Sylviah, and Jane as well as the staff of

the USE, CMA and investors who have made it possible for me to produce this piece of work

through their contribution in various ways. God bless you all.

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LIST OF ABBREVIATIONS

ALSI All Share Index

BOU Bank of Uganda

CDS Central Depositing System

CMA (U) Capital Markets Authority of Uganda

DFCU Development Finance Corporation Uganda limited

EADB East African Development Bank

GDP Gross domestic products

GTZ German Technical Cooperation

IMF International Monetary Fund

IPO Initial Public Offer

KA Kenya Airways

LSE London Stock Exchange

NSE Nairobi Stock Exchange

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Table of Contents

DECLARATION ......................................................................................................................................... ii

APPROVAL .............................................................................................................................................. iii

ACKNOWLEDGEMENT ............................................................................................................................. v

LIST OF ABBREVIATIONS ......................................................................................................................... vi

ABSTRACT .............................................................................................................................................. xi

CHAPTER ONE: INTRODUCTION ............................................................................................................... 1

1.0 ackground to the study. ............................................................................................................. 1

1.2 PROBLEM STATEMENT. .............................................................................................................. 2

1.3 PURPOSE OF THE STUDY. ........................................................................................................... 3

1.4 OBJECTIVES OF THE STUDY. ........................................................................................................ 3

1.5 RESEARCH QUESTIONS ............................................................................................................... 3

1.6 SCOPE OF THE STUDY. ................................................................................................................ 3

1.7 SIGNISICANCE OF THE STUDY. ................................................................................................. 3

CHAPTER TWO : LITERATURE REVIEW .............................................................................................. 5

2.0 INTRODUCTION. ......................................................................................................................... 5

2.1 REGULATION FRAMEWORK. ....................................................................................................... 5

2.2 Forms of regulation policies. ...................................................................................................... 6

2.3 The role of the regulatory framework. ....................................................................................... 7

2.4 The Uganda Securities Exchange ................................................................................................ 8

2.6 Functions of USE ........................................................................................................................ 8

2.7 GROWTH OF THE STOCK MARKET. ........................................................................................... 10

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2.8 Indicators of the growth in stock market. ................................................................................. 11

2.9 Factors affecting growth of the USE since inception ................................................................. 12

2.3.0 RELATIONSHIP BETWEEN REGULATION FRAMEWORK AND GROWTH OF STOCK MARKET. .... 14

2.3.5 CONCLUSION ........................................................................................................................ 15

CHAPTER THREE : METHODOLOGY ................................................................................................. 16

3.0 INTRODUCTION. ....................................................................................................................... 16

3.1 Research design ....................................................................................................................... 16

3.2 Study population. ..................................................................................................................... 16

3.3 Sample size. ............................................................................................................................. 16

3.4 Sampling methods. .................................................................................................................. 17

3.5 DATA COLLECTION. .................................................................................................................. 17

3.6. Data collection instrument ...................................................................................................... 17

3.6.1 Questionnaires ...................................................................................................................... 17

3.6.2 Interview guide ..................................................................................................................... 17

3.7 DATA PROCESSING, ANALYSIS AND PRESENTATION. ................................................................. 17

3.8 LIMITATION TO THE STUDY. ..................................................................................................... 18

CHAPTER FOUR : SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS...................... 19

4.0 INTRODUCTION ........................................................................................................................ 19

4.1GENERAL INFORMATION ABOUT RESPONDENT. ........................................................................ 19

4.2 FINDINGS ON REGULATIONFRAMEWORK. ................................................................................ 20

4.3 FINDINGS ON THE LEVEL OF GROWTH OF THE STOCK MARKET. ............................................... 24

4.4 FINDINGS ON THE RELATIONSHIP BETWEEN REGULATION FRAMEWORK AND THE GROWTH OF STOCK MARKET. ............................................................................................................................. 28

CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS ............................................................ 30

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5.0 INTRODUTION. ......................................................................................................................... 30

5.1. SUMMARY OF FINDINGS ABOUT THE OBJECTIVE OF THE STUDY.............................................. 30

5.2.1 FINDING ON THE IMPACT OF REGULATION FRAMEWORK ON THE STOCK MARKET................ 30

5.2.2 FINDINGS ON THE LEVEL OF GROWTH OF STOCK MARKET. ................................................... 30

5.2.3 FINDINGS ON THE RELATIONSHIP BETWEEN REGULATION FRAMEWORK AND THE GROWTH OF STOCK MARKET ........................................................................................................................ 31

5.3 CONCLUSION. .......................................................................................................................... 31

5.4 RECOMMENDATION. ............................................................................................................... 32

5.4 AREAS OF FURTHER RESEARCH ................................................................................................ 33

REFFERENCES................................................................................................................................. 33

QUESTIONNAIRE ............................................................................................................................... i

INTRODUCTORY LETTER .................................................................................................................. vi

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LIST OF TABLES

Table 1.Shows study population ............................................................................................................. 16

Table 2. Showing Gender of Respondents .............................................................................................. 19

Table 4.Showing Academic Qualifications of Respondents .................................................................... 20

Table 5. Showing whether capital requirement hinders firms from listing. .............................................. 20

Table 6.Showing Whether Company‟s with good audit track increases customer confidence .................. 21

Table 7.Showing whether firms fear of dilution of ownership. ............................................................... 21

Table 8.Showing whether the requirement that a firm should be involved in substantial the same

business for 3 yrs before listing hinders firm from listing. ...................................................................... 22

Table 9. Showing whether disclosure of companies‟ information hinder firms from listing..................... 22

Table 10. Showing whether regulation framework increases customer confidence in the companies. ..... 23

Table 11. showing whether the cost involved when listing hinders firms from listing ............................. 23

Table 12. Showing whether the stock market is growing at low pace ...................................................... 24

Table 13. Showing whether high level of activities in the stock market. ................................................. 24

Table 14. Showing whether there is increase in the number of firms intending to list.............................. 25

Table 15. Showing whether there is increases in foreign investment in the stock market ........................ 25

Table 16. Showing response on whether USE has high number of traded shares (turnover) .................... 26

Table 17. Showing response on whether there is limited number of securities in the stock market .......... 26

Table 18. Showing response on whether there are improvements in the trading methods ........................ 27

Table 19. Showing on whether growth in the stock market increases customer confidence ..................... 27

Table 20. Showing response on whether the stock price fully reflect the available information in the

market ................................................................................................................................................... 28

Table 21.Correlation .............................................................................................................................. 28

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ABSTRACT

The purpose of the study was to establish the relationship between the regulation policy and the

growth of stock market. Uganda securities exchange as the case study

The objectives of the study were:

To assess the regulation policy on Uganda stock exchange.

To establish level of growth of securities market.

To establish the relationship between regulation policy and the growth of Uganda

securities exchange.

The researcher used both descriptive and analytical research designs. The research designs were

appropriate because data was easily analyzed using frequency counts and percentage s derived

from the response obtained in questionnaires

Findings revealed that regulation framework has a positive effect on growth of securities

market although certain aspect of framework like, capital requirement, audit requirement,

dilution of ownership has made it difficult for SME, s to offer Initial public offers. The study

also found out that to an extent the exchange has grown moderately that is it has been recording

increase in number of listed firms, High market capitalizations, Increase in turnover,

improvement in trading method The relationship between the regulation framework and the

Uganda securities market was r=0.445.

The study came up with recommendations that may help to propel growth and development of

the USE these include; relaxing listing requirements, extensive investors education, and

continued privatization of state enterprises,

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CHAPTER ONE: INTRODUCTION

1.0 ackground to the study.

Regulation framework is an action that command and control the individual decision of the

firm in an effort to prevent decision making that would take inadequate accountability of the

public interest. (Kittin & Hacker, 2005). It‟s a mechanism devised by capital market authority

(CMA) to help in ensuring conformity to rules and regulation laid down by capital market.

These regulation policies are instituted to serve different purposes which include, listing, and

membership trading and settlement requirements.Regulation is needed to protect investors,

promote efficient capital markets, and enhance confidence. (Gordon, 2004).

Growth in stock markets refers to when a companies stock have over time displayed consistent

,sustainable increase in market value year by year, out performing stocks in it own sector or in

the market. (Nicholas, 2006).Growth of stock market increases the volume of long-term

investment, entrepreneur on the other hand, can diversify their risk and investor has access to

new instrument (Richard, 1996).The following factors show growth in stock market: increase in

market size, trading volume, turnover, trading methods and level of foreign investors (Levine,

2006)

A Company intending to apply for a listing on the Uganda Securities Exchange must conform to

the listing Rules and Regulations as stipulated in the Uganda Securities Exchange Listing Rules

booklet (2003). The regulation requirement includes; Capital requirement, Minimum floating of

20% for issued up equity, should have made profit for at least 3 years before listing, have been

involved in substantial the same business for 3 years with the same management ,securities must

be freely transferrable and companies must disclosure information regarding the company.

The current policy of the Capital Market Authority (CMA) is to protect and develop what it

views as a delicate market. Interestingly, the CMA allows the Stock Exchange to set up its own

rules to govern the actual trading on the market. (Rutega: USE: REPORTS; 1998/1999) The

trouble however is that the USE, being the sole exchange, can afford to be quite stringent in its

qualifications as there is little fear that the Companies will opt to list on another Exchange.

(Rock,2010).Kitamirike,CEO of the Uganda Securities Exchange (USE),observed that For a

company to qualify to list there are many things that they need to adjust; they have to change

their board of directors, their accounting system, operating systems, risk management systems,

http://en.wikipedia.org/wiki/Miss_Kittin

http://en.wikipedia.org/wiki/The_Hacker

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etc. It‟s quite extensive and often too complex for most local companies to want to undertake.

(The Independent‟s Feb 11, 2011).

The market has witnessed growth and development since its inception in 1997 when it was a

small smart up mart with only a single security and no listed firm to the point of having a number

of listed companies and several debt instruments from corporate and the government.

It has over the years listed 12 companies compared to 26 which are listed by the Nairobi stock

exchange and 15 by Tanzania stock exchange. It is lagging behind because the other two have

been using electronic trading while USE has just implemented it. The level of activities in the

stock market is increasing moderately and this lead to the market to increase in it trading days

to 5 days. The issue of high transaction cost when a company is undergoing the listing process

justifies little number of registered companies. However, it can be overcome by allowing

companies to gradually offset these cost against their profit for tax purposes or putting in place

policies that minimize cost. Local private firms fear loosing control over their firm and this

account for lack of product supply in the stock market. According to Rutega there is need to

increase private sector participation in the stock market.

The study explores the regulation framework and growth stock market and find out the level of

the growth of the market and sought recommendations that may help to bring about vibrant

securities exchange in Uganda.

1.2 PROBLEM STATEMENT.

The Uganda security exchange as registered stock exchange has through its regulation policy

promoted the growth of public ownership of investment and also the listing of debt and equity

instrument. However, the regulation policy in place to steer this remarkable industry through

sustainable growth and increased subscription, has had some of its rules and regulation

(membership requirement, capital requirements, trading and settlement requirement) have

attributed to low and stagnant level of the USE growth, this has resulted to slow growth in the

number of listed firms, the number is small and traded shares are low hence capitalization and

share volume are low (Capital Markets Journal, Vol. 10, No. 3, January-March 2006). The

Uganda stock exchange is still perceived as slow on it growth “. (The monitor, Kampala, 28th

march 2008) USE this because it recorded negative growth in the following areas; All share

index (ALSI), market capitalization, share turnover and volume of shares traded as of research

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department in 2008. These variables are used to show the growth, development and strength of

a stock market. (USE research department 2008)

1.3 PURPOSE OF THE STUDY.

The purpose of the study was to establish the relationship between the regulation policy and the

growth of the Uganda stock Exchange.

1.4 OBJECTIVES OF THE STUDY.

i. To assess the regulation policy on Uganda stock exchange.

ii. To establish level of growth of securities market.

iii. To establish the relationship between regulation policy and the growth of Uganda

securities exchange.

1.5 RESEARCH QUESTIONS

i. What is the impact of regulation policy on the Uganda stock market?

ii. What is the level of growth of the securities market in Uganda?

iii. What is the relationship between the regulation policy and the growth of the securities

market in Uganda?

1.6 SCOPE OF THE STUDY.

Subject scope.

The study focused on regulation framework as the independent variable and growth of stock

market as the dependent variable.

Time scope.

The data collected had a range of five years from 2005 to the year 2009.

1.7 SIGNISICANCE OF THE STUDY.

i. The study was to help identify the relationship between regulation framework and

growth of the stock market. The findings are to enable regulator of the stock market

understand the impact of the regulation framework.

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ii. To enhance the researcher understanding as a finance student researcher who intend to

delve deeper into the same area of research on issue pertaining the securities market

operations.

iii. To guide participant and players in stock market so as to enable them moot better

strategies and reforms that can be used to enhance growth of this sector.

iv. The findings are to contribute information for future academicians and researcher who

intend to devolve deeper into the same area of research.

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CHAPTER TWO : LITERATURE REVIEW

2.0 INTRODUCTION.

This chapter addresses major issue on the existing literature about the Uganda securities

exchange ltd, and how regulatory policy is used to ensure growth and development of securities

market in Uganda. The chapter also highlights the related literature concerning the USE, an

overview of its operation, trends in growth and development, factors that have been affecting

growth and development of the stock exchange. The most part of literature is from journals,

bulletins, and newspaper, internet, textbook and few related research books.

2.1 REGULATION FRAMEWORK.

Regulation framework is an action that command and control the individual decision of the

firm in an effort to prevent decision making that would take inadequate accountability of the

public interest. (Kittin & Hacker, 2005)

Following the ultimate establishment of the Uganda securities exchange, a broad framework

was devised to help in ensuring conformity to the rules and regulation laid down by the capital

market authority- and this defines the origin of USE regulatory framework.(Paul,1996).

The importance of capital market regulation is to conduct orderly and fair market and afford

some measure of investor protection. It evidently that law regarding investor protection is

pegged to companies act. There is need to reform the company act in order to increase it

effectiveness. (Mugagga, 2000)

Regulation is a key component of financial systems. The need for regulation reflects the

inherent feature of asymmetric information in financial markets. Regulation is needed to

protect investors, promote efficient capital markets, and enhance confidence. Regulators are

challenged to balance the needs of investor protection (which may lead to more stringent

regulation) with the need to promote market efficiency (which may lead to minimal

government interference in markets). (Gordon,2004).

The purposes of regulation in capital market are investor protection and maintenance of orderly

market. (CMA act sec.82 (26)).

http://en.wikipedia.org/wiki/Miss_Kittin

http://en.wikipedia.org/wiki/The_Hacker

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An appropriate and effective legal and regulatory framework is a must if market growth and

increased access to capital markets is to be achieved. Investors will be unwilling to risk

investments in a stock market which is poorly regulated without adequate information

disclosure and investor protection (Friedman et al. 2006)

2.2 Forms of regulation policies.

The regulatory policy imposed upon the securities in exchange in Uganda under the supervision

of the capital market authority (CMA) act 1997, were instituted to serve different purposes and

they are discussed below: A Company intending to apply for a listing on the Uganda Securities

Exchange must conform to the listing Rules and Regulations as stipulated in the Uganda

Securities Exchange Listing Rules booklet of 2003(1-23).

The regulation requirement includes;

A Company must have paid up capital of at least Ug.Shs 500 million for the first tier and Ug.Shs

250 million for the second tier. The initial costs and subsequent costs associated with accessing

the stock market can be a hindrance for firms. These costs range from capital required to the

transaction advisors to the time it takes to get an approval for a public offer (Tadashi, 2008)

At least 20 % (minimum floating) of the issued equity capital for which a quotation is being

sought must be offered to the public, whose value must be at least Ug.Shs 500 million for the

first tier and Ug.Shs 250 million for the second tier.

The Memorandum and Articles of Association of the company must comply with the

requirements of the Securities Exchange whether or not required by the law; it must also permit

the issuing of share or any other relevant security to the public.

A Company should have made profits during the last three years immediately proceeding

application for listing. The company should be engaged in substantially the same business and

management, and share control throughout the last three years before the application. The

listing requirements provide for financial transparency, regular reporting and auditing

requirements. (Choi, 2004).

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The securities for which listing is sought, must be freely transferable, subject to any restriction

on that may be imposed by written law (companies act (cap 85).Shares are negotiable and can

be passed on to another person; and they can be inherited. Transferable securities have two

main characteristics: (i) their negotiability, that is to say the possibility to transfer the rights

attached thereto without the need to comply with the formalities applicable to the transfer of

receivables set forth in the Civil Code and (ii) their function as investment instruments(

Dounia,2006).

The Exchange may also require further information regarding the background of the company,

its capitalization and share distribution, long-term and funded debt financing, dividend records,

pending legal action and so on. This help the Uganda securities exchange is able to evaluate the

firms (Jeswald, 2004).

A report by the company‟s auditors in respect of the last completed financial years (five for the

first tier and three years for the second tier) of the company if the company has been

inexistence for three, five or more years. Forecast earnings and dividends. Details of share

capital structure, loan capital and the borrowing powers of the company) Issuer should disclose

to CMA any information that affects its credit worth. The basic requirements are amplified in

the Securities Exchange Listing Manual.(Rock.2010)

The company‟s management must be of integrity. Have good corporate governance and ensure

that the company complies with the laws. The listing rules require directors and senior

management of an issuer to have collective appropriate expertise and experience for the

management of the business and details of such expertise should be disclosed in listing

particulars by the issuer (Jeswald, 2004)

It is the role of the sponsoring member of the Exchange to compile all this information and

fulfill the due diligence requirements of the Exchange in this way the Exchange ensures that a

proper due diligence has been done on the issuer prior to listing. (USE listing rules, 2003)

2.3 The role of the regulatory framework.

The capital market authority (CMA) in order to promote, develop and regulator the capital

market in Uganda puts these policies in place .the main role of the policies are:

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The development of aspect of the security market with emphasis on removal of

impendent to, and the creation of incentives for long term investment in productive

enterprises‟.

The creation, maintenance and regulation, through implementation off system in which

the market participant are self regulatory to the maximum practical extent, and of a

market in which securities can be issued and traded in orderly, air and efficient manner.

The protection of investor interest.

The operation of compensation fund.

The Uganda security exchange(USE) is the only licensed stock market in Uganda and

thus provide and monitor the actual trading facility, a trading floor at which brokers

meet to trade on behalf of their client.(katto,2006)

2.4 The Uganda Securities Exchange

The USE is an example of a developing stock market that has been characterized by humble

beginnings yet has grown considerably over time. It stands out as an average stock market with

great potential for growth, one that is making considerable effort to be a more significant driver

of economy in Uganda and the East African Region in general. (http//:www.use.org/info)

2.6 Functions of USE

The basic function of USE is to provide a facility for raising funds for investment in long-term

assets. While this is extremely important as the engine through which the stock exchange is

driven, there are other important functions of the USE which are as follows;

(http//:www.use.or/info)

(a) Mobilization of savings

The mobilization of savings for investment in productive enterprises as an alternative to putting

savings in bank deposits, purchase of real estate, and outright consumption. It is an addition to

the banking system as it provides more diversity to the already available financial instruments.

(b) Improvement of access to finance for new and smaller companies.

This is futuristic in most developing countries because venture capital is mostly unavailable.

The listing requirements of USE have been specially designed to meet the needs of this sector.

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(c) Creation of liquidity.

This is the ability of securities to be converted into cash at a market price. Acquiring and

selling of shares is fairly simple, inexpensive and swift and can be done at any time to suit the

investor‟s convenience.

(d) The growth of the related financial services sector

Institutions like the insurance, pension and provident fund schemes nurture the spirit of

savings. USE provides an avenue through which financial securities can be traded by such

institutions in order to facilitate their activities as financial intermediaries.

(e) Encouragement of higher standards of accounting, resource management and public

disclosure.

Institutions like the insurance, pension and provident fund schemes nurture the spirit of

savings. USE provides an avenue through which financial securities can be traded by such

institutions in order to facilitate their activities as financial intermediaries.

(f) Facilitation of equity financing as opposed to debt financing.

Equity financing has a component of flexibility – the company pays holders depending on its

performance whereas debt financing requires that the holder of the security be entitled to a

fixed sum in interest disregarding the performance of the company.

(g) Divestiture of Government Owned Companies.

The USE assists in the divestiture of government owned companies. The privatization process

through capital markets includes the flotation of shares and needs a secondary market for its

success. Through this process indigenous people are able to attain a stake in the privatized

companies.

(h) Price Discovery

Providing a mechanism for price discovery through open market operation at the exchange The

price at which a deal is made indicates not only the value of the shares in question but also the

value the market is willing to pay for the shares in question.

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2.7 GROWTH OF THE STOCK MARKET.

The following factors acts as determinants of growth of stock market listing requirements,

macroeconomic stability, and robust economic growth, well developed banking sectors and

good quality institutions as well as improved international relation through investment (King,

Levine &Robert, 1993).

Kirihara (2006) state that macro-economic factor has important effect on stock market growth.

This factor includes, gross domestic product, exchange rate, interest rate, current account and

money supply.

The market has witnessed growth and development since its inception in 1997 when it was a

small smart up mart with only a single security and no listed firm to the point of having a

number of listed companies and several debt instruments from corporate and the government.

This growth has been attributed to the increased confidence on the domestic market, and also

high level of foreign portfolios investment with the cross boarder listing of the following

companies; East African Breweries Ltd (EABL), Kenya Airways, Jubilee Holdings Limited

(JHL),Kenya commercial bank and equity bank ltd and The impending entry of Centum

Investments (new vision,4th Feb. 2011).

Growth in Stock markets may affect economic activity through the creation of liquidity, better

run companies and more disciplined macro economic policies. Financial deepening encourages

more liquids tock markets, lowers the cost of equity and encourages more sophisticated

banking systems and foreign investment. However, on the downside this oversubscription in

our markets also means that two thirds of the money raised is sent back to prospective

investors. (Bulletin Vol.7).

Basically the market have been experiencing growth and development that is there has been

an increase in listed securities, market capitalization, volume of traded shares, deals or offers

and bids, turnover ratio and transformation from a small start up mart to complex organization.

However the market has experienced slow growth in demand for securities and there has been

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low number of shares trade in the market thus in comparison with other stock markets like NSE

which have forty seven listed companies at the moment USE is lagging behind.

2.8 Indicators of the growth in stock market. Indicators of growth or development in stock market include (Levine and zervos,2003):

Market capitalization. This measure the market size by diving gross domestics‟ product from

value of listed shares. The market has grown from a small start up mart to a platform with an

average market capitalization of billions shillings and thousands of stakeholders (Rutega 2008).

Trading volume/activity. Trading volume ratio is got by total number of stock traded on the

stock exchange divide by gross domestic product. It measures the organization trading of firm

equities as share of national output. This together with market capitalization provides more

information on the country stock market. If the volume of trade is high there is growth in the

stock market unlike when it is low. USE trading activity are not stable they keep on varying, for

example year2009/2010 started by it trading activity declining by 40 %.( Katto, 2010)

Turnover. This refers to the total number of share traded. This used to measure the transaction

cost and returns. a small but liquid market will have a high turnover but small trading rate while

a large but inactive market will have large market capitalization but small turn over.

Level of financial integrations of the equity market. In a financial integrated market, capital

should flow across international borders to equate the price of risk. in Uganda it has five

companies that have cross listed and still other are in the process i.e. Centrum Kenya. This shows

that it has integrated it financial system.

Increase in trading day and hours. The increased turnover and trading volumes at the stock

exchange over the past year have been an indication of an increase in the trading appetite of the

market. This called for more trading days (rock, 2010). This shows that the stock market trading

activities have increased in volume thus why Uganda stock market increased from three days to

five days in 2010.

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Capital raising (Liquidity). in a developed stock market firm are able to raise capital easily.

Companies are raising capital through the Uganda stock market, though the number is still

limited (Joseph Kitamirike). Rutega stated that there is need of encouraging more private firm

too list.

Activities in the stock market. When there is an increase in the number of activities it implies

that there is growth. Trading in the security market instrument is judged to be efficient and

growing when the price of stock fully reflects the available information on the market. Trade in

stock are still having uncertainty as realization that domestic capital market in African states

continuously depend on FDI ,and earnings from other external market(Rutega,2003).

Number of listed companies. When the stock market has a big number listing is signifies growth.

Uganda stock market still has a few numbers as compared to others. There is need to encourage

more listing Currently the exchange has twelve (12) listed companies five of which are cross lists

from Kenya and seven are local firms(Rock,2008).

Improvement in trading methods. Uganda stock market has introduced electronic trading. This

indicates that it growing.

Growth of stock market increases the volume of long-term investment, entrepreneur on the other

hand, can diversify their risk and investor has access to new instrument. (Richard, 1996)

2.9 Factors affecting growth of the USE since inception

The following are the factors that have been affecting the Uganda securities market since its

inception. They are both the unique and ordinary. (Muhwezi ,2005)

Listing requirements .For a firm to be listed it has to conform to the listing requirements of

the authority this therefore is demanding and very few firm are capable of meeting the

requirement. Upon such few firms are registered and hence sluggish growths because of few

securities available in the market.

Poor conducive macroeconomic environment in Uganda coupled with high inflation rates,

low savings and investment ratios. Uganda in general has experienced poor macroeconomic

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climate due to the past situations this therefore counts for the sluggish growth of capital

markets because such a state does not enable growth and development.

Costs involved in floatation or initial public offers. Given the fact that capital markets rely

on securities issued by listed firms and for a firm to be listed it has to incur costs like

commissions and fees to broker‟s, agents and advisor. These costs scares away the intending

firms and thus a justification of few numbers of firms registered and because of this the growth

is yet to make an impact.

Inadequate efforts made for strong and clear regulatory framework to boost investor’s

confidence. Capital markets have not availed members of the public a clear and strong

framework which is supposed to be guiding them in the market this has left them with no

confidence to invest in capital markets thus growth and development is slow.

Insufficient demand and supply of capital market securities. Its common for securities to be

oversubscribed or undersubscribed because the demand is low or at sometimes it exceeds the

provided securities, most listed firm provide less hence oversubscription for example Bank of

Baroda had 16.7% oversubscription such act therefore shows a limit to the extent the market

can‟t grow and develop with shortages.

Political instabilities Uganda have experienced upheavals this has acted as a barriers to

investments and development in general because very few people are ready and willing to

invest in such economy these have affected the growth and development of the market.

Inadequate investor’s education and information Most of Ugandans has resource but lack

investment education and information upon such they therefore invest in tangible assets only

hence slow growth and development of capital markets which deals with intangible assets like

shares and bonds.

Collapse of the industrial sector during Idi Amin`s reign. Because of the situation Uganda

has remained with few industries which can hardly sustain a vibrant capital markets because

most of them are family owned and sole proprietorships business

Poor corporate governance among some individuals in the country that would be listed

firm do not meet the listing requirements and because of this very few firm make it hence a

sluggish growth. For example national social security fund was at the apex of collapse due to

poor corporate governance.

14

Corruption and misappropriation of company funds This have hindered need for expansion

and listing of firms which can increase capital markets activities and in the end results to

growth this is seen in various organizations affected by such.

Also as reported in the journal for the capital market industry, that the above (Tarinyeba, 2004).

2.3.0 RELATIONSHIP BETWEEN REGULATION FRAMEWORK AND GROWTH OF STOCK MARKET.

Regulation is a key component of stock market. The need for regulation reflects the inherent

feature of asymmetric information in financial markets. Regulation is needed to protect

investors, promote efficient capital markets, and enhance confidence. Regulators are challenged

to balance the needs of investor protection (which may lead to more stringent regulation) with

the need to promote market efficiency (which may lead to minimal government interference in

markets). ( Gordon,2003).

CMA may need to strike a delicate balance between maintaining regulations not prohibitive

towards entry of new players while keeping a watchful eye to ensure that investors are not

abused by listed companies ignoring practices of good corporate. Encouraging increased entry

of institutional investors is perhaps a critical strategy that could determine the next boost in

Uganda's securities market. (Gordon, 2003)

The USE must develop flexible capital requirement that are aimed at encouraging institutional

investors to divert their resources to our market now this lead to more increased investor

confidence and hence more listing.( Tadashi,2008)

The securities for which listing is sought, must be freely transferable, subject to any restriction

on that may be imposed by written law (companies act (cap 85).Shares are negotiable and can

be passed on to another person; and they can be inherited this increases liquidity in the stock

market ( Dounia,2006).

Increase in trading days signifies increase in day trading activities this indicates growth in the

stock market due to increased day activities (Rock, 2008).

Uganda's seemingly stringent regulation in this regard is thus placed to increase investor

confidence in our budding securities market (katto, 2006).

15

With the above hindsight of USE, the capital markets authority (CMA) under the capital market

industry designed a regulation policy to increase the prospects available for attracting capital

flow into productive enterprise in the country no matter how small.

Regulation framework on the security exchange has manifested under the membership

regulation, listing regulation and trading and settlement regulations are all designed to protect

the investor and encourage increased participation, subscription and trading, on the USE of all

which translate into its growth. It‟s against its strengths and weaknesses that the growth of

security market Uganda can be partly due stringent regulation policies.

2.3.5 CONCLUSION

The regulation policy framework in place at Uganda Securities Exchange despite its

tremendous contribution in security market development in Uganda as far as increasing the

number of stock market listing and volume of trading, it likewise has led to the stagnation of

the infant industry by stipulating high demand only on would be young, growing and

prosperous entrants on the security market domain.

Also the long history and efforts made to revitalize the stock market growth and development

of primary markets is still very slow further the number of traded securities in the market is

minimal (KIPPRA, 2005). This is true from the statement that despite the successes enumerated

above the exchange is still face with a number of challenges notably public awareness, limited

products, products for the SME sector, manual processes to mention but a few (Opagi,

2007).These therefore implies that the securities exchange in Uganda has not developed which

justifies a study to establish the reasons for such.

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CHAPTER THREE : METHODOLOGY

3.0 INTRODUCTION.

This chapter describes the systematic process by which the study was conducted. It attempt

was to present descriptive information on design, population and sample selection techniques,

source and data collection, instruments, data processing and analysis and anticipated limitation

of the study.

3.1 Research design

Descriptive research design and analytical research design were used to help the researcher

analyzed date obtained into frequency counts and percentages.

3.2 Study population.

The study population involved the staff members of the USE, CMA (U), and the investors in

the securities exchange that is post, potential and the current investors. The sample size of a 30

respondents was taken whereby 12 were taken from the USE, 6 from CMA (U) and the rest

were from the investors.

3.3 Sample size.

The sample size of 32 respondents was taken. This included USE, CMA (U) and investors.

Table 1.Shows study population

Respondents Target population

USE 12

CMA (U) 6

investors 12

Totals 32

17

3.4 Sampling methods.

Researcher used purposive sampling method to collect data from Staff of USE,CMA and

investor, this because they were knowledgeable on this field.

3.5 DATA COLLECTION.

Primary data.

This refers to the raw fact collected for a given research. Primary data was obtained through

different method such as use of questionnaires, interviews, observation and participation.

Secondary data

This included; reviewed literature on regulation framework and growth of stock market. On

Journals, Text books, News papers, Audit reports, Internet among many more.

3.6. Data collection instrument

3.6.1 Questionnaires

Researcher used questionnaire in order to help her collect information from different

respondent. The questionnaires included close ended questions. The questionnaire was

relatively short and simply worded to encourage response and compliance. Used because it‟s

easy and give high results.

3.6.2 Interview guide

This was used as a control tool to make sure that there was coordination between the

respondent and the researchers. This was provided to USE, CMA (U) staff and investors.

3.7 DATA PROCESSING, ANALYSIS AND PRESENTATION.

This refers to the process of systematically applying statistical and/or logical technique to

describe, illustrate, condense, recap and evaluate the data.

Data collected was edited to identify and eliminate errors. This helped in checking whether the

questionnaires‟ schedule was complete, accurate, uniform, eligible and comprehensive enough

to give meaningful information sought; for coding and analysis. Analysis was done using Excel

18

to produce descriptive statistics like frequency tables and percentages; to access impact of

regulation framework and the growth of stock market .Implications of various findings were

derived and recommendations made appropriately basing on empirical outcomes. Using

statically package for social scientists (SPSS) was used to analyze the relationship between

regulation framework and the growth of stock market

3.8 LIMITATION TO THE STUDY.

Reluctance of respondents to give information. The researcher worked in hand in hand

with the respondent to ensure that they give the required information for the research.

The time given to the researcher to collect data and conduct the whole research was not

enough because it involved a lot of time and commitment and the researcher had other

course obligations other than the research. The limitation was solved by fully

concentration on research.

Financial constraints, There was no sponsor identified to give financial support.

19

CHAPTER FOUR : SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS.

4.0 INTRODUCTION

This chapter presents the findings according to the data collected. The findings are presented

according to the important variables, objectives of the study and the research questions.

4.1GENERAL INFORMATION ABOUT RESPONDENT.

Table 2. Showing Gender of Respondents

Gender Frequency Percentage

Male 16 53.3

Female 14 46.7

Total 100

Source; primary data

Figure 4.2 above shows that the majority of the respondents were male represented by 53%

while the remaining 47% are female. This means that majority of the people involved in

securities businesses are men.

Table 4.3: shows the respondent’s age

Age Frequency Percentage

18-24 1 3

25-34 12 40

35-44 9 30

45-54 6 20

55 And above 2 7

Total 30 100


Table 4.1 shows that majority of the respondents were in the age bracket of 25-34 years which

holds 24% and35-44 has 30%. its clearly seen that most of the respondents are in the middle

Age an interpretation that its because they are educated and are aware of how securities

20

oparate and that they are working group thus they have resources to invest unlike the age

bracket of 18-24 years where the case is different.

Table 3.Showing Academic Qualifications of Respondents

Education level Frequency Percentage

Certificate 0 0

Diploma 6 20

Degree 11 36.7

masters 13 43.3

Total 30 100


Findings revealed that 0%of the respondents were certificate holders, 20% diploma holders,

36.7% degree holders and 43.3% master holder as illustrated in the table below;

From the above table inference drawn out is that most of the people involved in securities

exchange are educated and this is the reason why they hold the largest proportion.

4.2 FINDINGS ON REGULATIONFRAMEWORK.

Table 4. Showing whether capital requirement hinders firms from listing.

Frequency Percentage

Strongly agree 3 10

Agree 13 43.3

Not certain 1 3.4

Disagree 13 43.3

Strongly disagree 0 0

Total 30 100


Table 4.7 43.3% of the respondent‟ Agreed that capital requirement hinders firm from listing

followed by 10% that strongly agreed 3.4 % were not certain,43.3% disagreed with the view

standing on the fact that the amount was justifiable. The highest number of respondents agreed

21

that capital requirement hinders firm from listings. The capital requirement hinders firm i.e.

SME‟s from listing.(Tadishi,2008).

Table 5.Showing Whether Company’s with good audit track increases customer

confidence


Strongly agree 7 23.3

Agree 16 53.3

Not certain 3 10

Disagree 2 6.7

Strongly disagree 2 6.7

Total 30 100


From the table above 23.3% strongly agreed that companies with god audit track increase

customer confidence, 53.3% off the respondent agreed, 10% were uncertain while 6.7

disagreed. According to the findings it shows that companies with good audit history increase

customer confidence because it a basic for assessing future viability.

Table 6.Showing whether firms fear of dilution of ownership.

Frequency percentage

Strongly Agree 3 10

Agree 20 66.6

Not certain 2 6.7

Disagree 4 13.3


Total 30 100


Finding reveled that 10% strongly agreed, 66.6% agreed, 6.7%were not certain while 13.3%

disagreed and 3.4%srongly disagreed. This indicates that people fear loosing ownership of their

business.

22

Table 7.Showing whether the requirement that a firm should be involved in substantial the

same business for 3 yrs before listing hinders firm from listing.

Frequency percentage

Strongly Agree 6 20

Agree 17 56.6

Not certain 1 3.4

Disagree 5 16.6


Total 30 100


From the graph above, 20% strongly agreed that the requirement that a firm should have

involved in substantial the same business 3 years hinder listing of infant firms.56.6% agreed,

3.4% were uncertain while 16.6%disagreed and 3.4% strongly disagreed.

Table 8. Showing whether disclosure of companies’ information hinder firms from listing.



Agree 15 50

Not certain 5 16.7

Disagree 2 6.6


Total 30 100


Findings revealed that 23.3% strongly agreed that disclosure of companies information hinders

firm from listing, 50% agree, 16.7are not certain, 6.6% disagreed and 3.4 strongly disagreed

Information disclosure provides financial transparency and hence increases customer

confidence. (Choi,2004)

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Table 9. Showing whether regulation framework increases customer confidence in the

companies.



Agree 16 53.3

Not certain 3 10

Disagree 3 6.7

Strongly disagree 6.7

Total 30 100


From the above graph 23.3% strongly agreed, 53.3 agreed, 10% were not sure, 6.7% disagreed,

6.7% strongly disagreed that regulation framework increases customer confidence in the

companies The analysis indicate that its through regulation that are able to monitor and

understand the need of investor and be able to respond to them.(Gordon,2004)

Table 10. showing whether the cost involved when listing hinders firms from listing



Agree 9 30

Not certain 2 6.7

Disagree 5 16.6


Total 30 100


From the above graph 43.3% strongly agreed,30% agreed ,6.7% were not sure ,16.6%

disagreed 3.4% strongly disagreed that the cost involved when listing hinders firms from

listing. These ranges from cost for hiring external auditor and transaction advisor to the time it

get approval for public offer. (Tadashi, 2008).

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4.3 FINDINGS ON THE LEVEL OF GROWTH OF THE STOCK MARKET.

Table 11. Showing whether the stock market is growing at low pace



Agree 13 43.3

Not certain 2 6.7

Disagree 10 33.3


Total 30 100


From the table below 6.7% strongly agreed ,43.3% agreed,6.7% were not sure ,33.3%

disagreed 10% strongly disagreed that the stock market is growing at low pace.. Findings

indicate that there growth in the stock market is at low pace.

Table 12. Showing whether high level of activities in the stock market.



Agree 16 53.3

Not certain 1 3.4

Disagree 5 16.6


Total 30 100


From the above a net of 38.3% of the respondent agreed that high level of activities‟ this

indicate growth in stock market.3.4% were not sure while a net of 10% disagreed. The level of

turnover in the securities market is high. Level of turnover keeps varying. (Katoo, 2010)

25

Table 13. Showing whether there is increase in the number of firms intending to list.



Agree 11 36.6

Not certain 1 3.4

Disagree 11 36.6

Strongly disagree 0

Total 30 100


Findings revealed that a total of 60% of the respondent agreed there is increase in number of

firms intending to list in the securities market.3.4% were not sure and 36.6% of the respondent

disagreed. Finding revealed that more firm are intending to list.

Table 14. Showing whether there is increases in foreign investment in the stock market



Agree 17 56.6

Not certain 0 0

Disagree 4 13.4


Total 30 100


Findings revealed that a net of 31.6% agreed that there is increase in foreign investment in the

stock market. a net of 18.4% disagreed. This indicates that with increased in cross listing. Most

firm that are crossing are familiar with the listing requirement in there own countries unlike

local firms(Kitamirike,2010).

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Table 15. Showing response on whether USE has high number of traded shares (turnover)


Strongly agree 6 20

Agree 12 40

Not certain 0 0

Disagree 9 30


Total 30 100


Findings reveled that a total of 60% agreed that USE has high number of traded shares. While a

total of 50% disagreed. This is used to measure the transaction cost and returns.(Levine,2003)

Table 16. Showing response on whether there is limited number of securities in the stock

market



Agree 11 36.7

Not certain 6 20

Disagree 4 13.3


Total 30 100


From the table above23.3% strongly agreed, 36.7% agreed, 20% were not sure, 13.3% disagreed,

6.7% strongly disagreed that there is limited number of securities in the stock market. Finding

revealed those products available in the stock market are few. Need to introduce product like

derivative that can be used to hedge against risk.

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Table 17. Showing response on whether there are improvements in the trading methods

Responses Frequency Percentage


Agree 13 43.3

Not certain 1 3.4

Disagree 12 40


Total 30 100


From the table above a net of 28.3% agreed that there has been improvement in the trading

method in stock market while a net of 20% disagreed. Findings indicated that there has been

improvement of trading method from open cry to electronic.(Rock,2008).

Table 18. Showing on whether growth in the stock market increases customer confidence


Strongly agree 3 10

Agree 13 43.3

Not certain 4 13.3

Disagree 8 26.7


Total 30 100


Findings revealed that 10% of the respondent strongly agreed that Growth in the stock market

increases customer confidence and hence more investment 43.3% agreed, 13.3% were not sure,

26.7% disagreed and 6.7% strongly disagreed.

28

Table 19. Showing response on whether the stock price fully reflect the available

information in the market


Strongly agree 6 20

Agree 16 53.3

Not certain 2 6.7

Disagree 6 20

Strongly disagree

Total 30 100


Findings revealed that a total 73.3% agreed, 26.7% disagreed that stock price fully reflect the

available information in the market.

4.4 FINDINGS ON THE RELATIONSHIP BETWEEN REGULATION FRAMEWORK AND THE GROWTH OF STOCK MARKET.

The Pearson correlation coefficient(r) was used to establish the relationship between regulation

framework and securities growth.

Table 20.Correlation

regulatory growth

Regulatory

framework

Pearson

Correlation 1 .445(*)

Sig. (2-tailed) . .014

N 30 30

Growth of

stock

market

Pearson

Correlation .445(*) 1

Sig. (2-tailed) .014 .

N 30 30

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* Correlation is significant at the 0.05 level (2-tailed).

Source: Statistical package for the social scientist (SPSS) Output.

Result revealed weak but positive relationship framework and growth of stock market

(r=445*,sig.=0.05).this implies that the more effort that Uganda Security Exchange limited

towards regulation framework, the more the securities market will grow and flourish.

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CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS

5.0 INTRODUTION.

Based on the findings, this chapter tries to summarize these findings of the case study, makes

conclusions and recommendation as per the research objectives

5.1. SUMMARY OF FINDINGS ABOUT THE OBJECTIVE OF THE STUDY.

5.2.1 FINDING ON THE IMPACT OF REGULATION FRAMEWORK ON THE STOCK MARKET.

The study revealed that membership requirement regulation required that companies to be

listed must be fully and properly incorporated in line with the regulations set by the companies

Act.

These requirements were to ensure that participant firms of the stock market are legal and

legitimate promote and therefore are properly constituted. The rationale behind this was that the

regulation endeavor to promote growth and efficiency in the security market by making sure

companies are listed has a sustainable capital base, good management and that their

performance record(audit track) are good enough to attract potential investors

The study concluded that, the listing requirement did contribute to the growth of the securities

exchange in Uganda, but however only to an extent. This was because the procedures of those

listed was stringent and thus eliminated the inefficiency companies. However, respondent felt

that listing requirements were too rigid that they technically eliminated would be good

participant because of high capital requirement based system, registration procedure,

membership composition requirement and evidence of performances for over three years.

5.2.2 FINDINGS ON THE LEVEL OF GROWTH OF STOCK MARKET.

The study found out that to an extent the exchange has grown moderately that is it has been

recording positive growth since inception. For instance; increased number of listed firms, High

market capitalizations, more cross listings Increase in trading days or hours, improvement in

trading method to electronic increases and increase in the volume of long term investment

where investors has access to new instrument.

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5.2.3 FINDINGS ON THE RELATIONSHIP BETWEEN REGULATION FRAMEWORK AND THE GROWTH OF STOCK MARKET

The study revealed weak but positive relationship of 0.445 between the regulation framework

and the growth of Uganda Securities market. With regulation in place channeled toward

supporting a vibrant and competitive stock market, however needs to be remodeled to

incorporate the demand of the changing and dynamic securities industry on a regular basis.

5.3 CONCLUSION.

The study was set out to access the regulation framework of the USE, factors affecting growth

of the USE and to establish the relationship between regulation framework and the growth of

securities market.

The study found out that USE is growing exchange market that is its state can be termed as

developing and has recorded positive growth since inception though it has been sluggish.

Respondent believed that the regulation framework has managed to play a big role in getting

investors to access domestic capital market and encourage a home grown, strong, efficient and

growing capital market. Evidence also point out to a strong belief in the regulation framework

in promoting sound and respectable stock market that promotes private ownership of shares and

bond issues. Respondent believed that with good regulation it increases their confidences and

thus more investors. Based on the study other internal factor like trading and settlement

mechanisms seemed to influence the operation of the stock market positively. However

stringent regulation demand still bogs down the security market.

The research also found out that there are factors that have been contributing to this sluggish

growth of the USE. These factors are both those that are common to other stock markets and

others unique to this entity only.

The study also found out that with implementation of certain factors noted the exchange will be

in position to be in the same steps with other stock markets hence a growth and development

securities market in Uganda.

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5.4 RECOMMENDATION.

In view of the challenges discussed in the previous sections with regard to the USE and African

stock markets in general, the following recommendations are proposed. They make specific

reference to the USE but may be applicable to other emerging or developing markets.

i. There is need to improve on the stringent demand that are imposed on prospective

companies that intend to list on the securities exchange. The listing requirements are too

rigid and should be relaxed to accommodate middle level leveraged firms that are

growing and profitable, but lack avenues to invest funds. This should be encouraged

because the largest business block in Uganda is small to medium enterprises business.

ii. The USE and CMA should compile a list of potential issuers of both equity and debt and

initiate contact with them to educate and improve their awareness of the benefits and

relevance of capital markets for their operations. In addition the two institutions should

set up branch offices at the district and provincial levels to facilitate outreach to the

general public.

iii. Investor‟s education may also be done through incorporating information on investment

and the capital markets in the secondary school and college curriculum to enhance the

awareness by the younger generation of Ugandans who make up more than half of the

total population. Out of a total population of about 38 million in Uganda, it is estimated

that only fraction are investors in the USE. This is a very low rate and the number can be

increased as more Ugandans are informed of the investment opportunities available to

them at an early stage of their lives.

iv. For the overall development of capital markets, USE needs to relax the minimum

requirements for trading securities in order to accommodate companies that have shares

that are transferable to members of the public yet they do not meet the stringent listing

requirements. The challenge will be to simplify and ease listing conditions without

compromising investor protection. Streamlining public offering procedures and limiting

the number of market agents involved in the issuing process are examples of

simplification of the listing requirements.

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v. Modernization of the trading system to improve liquidity, attract foreign investors and

reduce transaction costs is necessary. Automation of trading will complement the current

automation of the depository, settlement and delivery and facilitate the ability of the

market to cope with increase in new listings or increased trading and turnover particularly

with the imminent privatization of many state-owned companies.

5.4 AREAS OF FURTHER RESEARCH

The researcher recommends that the following areas for further study;

Challenges of regulation and monitoring of capital market in Africa; problem and

prospects.

The performance of listed firms and unlisted. This will show the advantages of listed

companies over unlisted ones and vice versa.

The effects of price fluctuation in securities exchange and firms performance. This will

help to instill confidence to investors in the market.

The effects of the stunted nature of securities exchanges in East and Central Africa USE

being the case study. This will arouse their interest to combat the barriers involved.

REFFERENCES.

Choi J. Stephen (2004), “A Framework for the Regulation of Securities Market

Intermediaries”, UC Berkeley, Boalt Hall Berkeley Business Law Journal, Vol. 1, No. 1, 2004

34

Dounia Shita (2006): Transferable securities-what‟s in a name? - Impact on the scope of the

Belgian Collateral Act

East African securities exchange (2008): The exchange magazine .Nairobi. EASEA

Felice B. Friedman and Claire Grose (2006). Promoting Access to Primary Equity Markets. A

Legal and Regulatory Approach. World Bank Policy Research Working Paper 3892, April

Gilson, R. J., & Black, B. S. (1998). Venture Capital and the Structure of Capital Markets: Banks

Versus Stock Markets. Journal of Financial Economics , 47, 243-277.

Gordon Boissonneault,(2003). The Relationship between Financial Markets and Economic

Growth.

GTZ & BOU (2009): capital markets development in Uganda.

Harry Sassion: general issue in in regulation and development of local market.

IMF (2007): Stock markets development in sub-Saharan Africa: critical issues and challenges.

IMF (2008): Determinants of stock markets development in emerging economies.

Jeswald W. Salacious „Corporate Governance in the New Century‟ (2004) 25 No.3

King G, Robert and Ross Levine (1993): Finance and growth.

Kirihara,Y,,2006”The relationship between exchange rate and stock prices during the

quantitative easing international journal of business, vol 11,no 4.pp375-376”

Paul Melly.(1996) .capital market development..p20

Rocks, D. (2008). Uganda's Stock Exchange Grows Up. BusinessWeek , 14, 1-2.

Sheehan, Michael and Zavala. African Securities Exchanges: Challenges and Rewards the

Handbook of World Stock, Derivative and Common Market.

Simeon, D., Rafael, L. P., Florencio, L. S., & Andrei, S. (2002). The Regulation of Entry.

Quarterly Journal of Economics , 72, 117.

Stuart R Cohn and Fred (1998): Capital markets development in Uganda.

Tadashi Endo (2008). Broadening the Offering Choice of Corporate Bonds in Emerging

Markets: Cost-Effective Access to Debt Capital. Policy Working Paper 4655.

UNITAR (2001): Capital market development the road ahead

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United Nations Development Program (2006): African stock market.

USE (2003): Listing on Uganda securities market.

USE (2007): Annual report.

USE (2008): Annual report.

USE (2010):Annual report

Ross, L. (2008, June 12). Stock Markets: A Spur of Economic Growth. Retrieved February 13,

2011, from World Bank; Finance and Development: http://www.worldbank.org/fandd

CMA (U) (January-march 2009): Quarterly review.2

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MAKERERE UNIVERSITY

COLLEGE OF BUSINESS AND MANAGEMENT SCIENCE

BACHELOR OF COMMERCE

QUESTIONNAIRE

Dear respondent,

The researcher is a student at Makerere University currently undertaking a research on

Regulation framework and the growth of stock market using Uganda Stock Exchange as the

case study.

Being knowledgeable on this field, I humbly request you to spare a moment of you time and

kindly fill in this questionnaire. These views are going be used as an interpretation concerning

the above topic.

Your view will be treated with high levels of confidentiality and used only for academic

purposes

Thank you very much

SECTION A: General information.

Please tick the most appropriate.

a) Gender: (a) Male (b) Female

b) Age: (a) 18-24 years (b) 25-34years

(c) 35-44years d)45-54 years

(e) 55 and above

c) Education level

(a)Below a diploma (b) Diploma holder

(c)Degree holder (d) Masters Level

(e)Others

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SECTION B .Regulation framework.

1. Capital requirement hinders firms from listing.

Strongly agree Agree Not certain disagree Strongly disagree

2. Good audit track of a company increase investor‟s confidence


3. The policy that a company must be registered under company act hinders company listing.


4. Firms fear dilution of ownership.


5. The requirement that a firm should have involved in substantial the same business and made profit

for 3 years hinder listing of infant firms.


6. Disclosure of companies information hinders firms from listing.


7. Regulation framework increase customers confidence in the companies


8. Minimum floating of 20% has a negative effect on the prospective client


9. The cost involved in initial public offer hinders firm from listing


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10. The company has to have the same management for 3yrs before listing hinders firm from listing.


SECTION C. Growth of stock market.

1. Uganda stock exchange is growing at a slow pace.


2 . Level of activities in the securities market is high.


3.There is increase in the number of firms intending to list.


4. Uganda Securities exchanges has more foreign investment.


5. Uganda Securities Exchange has high number of traded shares(turnover).


6. there is limited number of securities(product) in the stock market.


7. There is improvement on trading methods.


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8. Growth in the stock market increases customers confidence.


9. The stock price fully reflect the available information on the market.


SECTION C. The relationship between regulation policy and the growth of stock market.

1. A well regulated stock market increase market capitalization.


2. A good account record of a company increase the number of investors due to increased confidence.


3. Favorable listing requirements result in increase in the number of listed companies.


4. Security listed being freely and easy transferable increases the liquidity of the stock market.


5. Increase in trading days is as a result of flexible regulation policies.


6 .Well governed regulation monitors the activities in the stock market.


7. Provision of bulletins and account records annually increases the investor‟s confidence thus

increasing the number of deals and offers.


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8. USE through a good regulation policies that it easy to understand providing has encouraged and

foster growth of the financial market.


9. Regulator have a challenge of balancing the need of the investors (which may lead to stringent

regulation) with the need to promote market efficiency (which may lead to minimal) government

interference.


10. High value of all share indexes is as a result of favoring regulation policy.


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INTRODUCTORY LETTER

REGULATION FRAMEWORK AND THE GROWTH OF THE STOCK...

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