External Equity Financing: Assessing the Interest of Construction Companies to List at Dar es Salaam Stock Exchange
Loading...
Date
2017-09
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Operations Research S
Abstract
This study examines construction companies’ interest to external equity through listing to Dar es Salaam Stock Exchange. This follows various reasons among others the fact that the sector is capital intensive and its contribution to the Gross Domestic Product. Another reason was the fact that data indicates tenders in construction industry are offered to foreign firms due to the lack of capital investment by the local companies. Despite all these, there is low motivation and interest of companies to use the capital market to acquire equity despite of it being the cheapest source of fund. Given the magnitude of construction industry business in Tanzania, there is no single company listed to the bourse to date. This study was thus done to assess the readiness, awareness, influence of profitability and internal framework of the company’s financial needs on the interest to list. A simple random sampling technique in selecting respondents and informants were selected purposively for data generated through questionnaire administered to them.
Findings of the study indicates that majority of contractors prefer to use internal generated funds to finance their activities, and if external finance is necessary they prefer debt financing through lending from commercial banks and other debt financing sources so they take external equity financing as a last resort –and this follows pecking order theory. The results show that there is low interest of listing because of perceived stringent listing requirements and high costs associated with listing.
Description
Keywords
Stock Exchange, Equity, Construction
Citation
https://udbs.udsm.ac.tz/images/Docs/icaesb_2017_program.pdf