The Impact of Stock Market Listing on the Financial Performance of Companies within the Rwanda Stock Exchange (RSE)

1David Nyambane and 2Zimulinda, Umukesha Marie Noella

1Faculty of Business and Management, Kampala International University, Western Campus, Uganda.

2Faculty of Business Management of Mount Kenya University Kenya.


The study, titled Stock Market Listing and Company Performance in Rwanda aimed to explore the connection between a company’s stock market listing and its performance. Examined within were firms listed in the Rwanda Stock Exchange, specifically Bralirwa, KCB, and BK. Utilizing a quantitative research design, the study relied solely on secondary data, primarily the financial statements of the three companies that operated in Rwanda between 2008 and 2015. The scope included BK, Bralirwa, and KCB. Data gathered from 2010 to 2012 was structured in tables, with financial ratios computed and subsequent analysis conducted using SPSS to ascertain the relationship between stock listing and financial performance. The results demonstrated a positive yet statistically insignificant relationship between stock listing and the financial performance of the listed firms. Notably, the correlation between financial leverage and financial performance lacked statistical significance (R = 0.303, P > 0.01) and showed a negative correlation with market ratio (0.582, P > 0.01). Recommendations included a call for improved liquidity management, especially in working capital for firms like BK, to address the impact on liquidity levels while maintaining financial stability. Stakeholders were encouraged to recognize the linkage between stock listing and financial performance and adopt suitable measures to assess and analyze the financial status of companies. Moreover, the study revealed that companies in Rwanda tend to rely more on short-term debt than long-term debt, potentially due to the underdeveloped bonds market in the country. Liquidity ratios exhibited a negative relationship with financial leverage, indicating that highly profitable and well-performing companies in Rwanda tend to have less debt and rely more on internal financing sources, aligning with the pecking order theory. Furthermore, the study emphasized considering the market value of capital structure in evaluating stock listing, given its stronger connection to financial performance compared to the book value.

Keywords: Stock Market, Listing, Performance of Companies, Rwanda Stock Exchange, Liquidity.


In today’s highly dynamic, competitive and vibrant business environment, where a plethora of stakeholders have an interest, in some form or another, in the progress of a certain company, the various metrics of financial performance for a company are arguably as important as ever to measure and monitor for the company’s stakeholders [1]. Much of the research within business administration could be argued to be centered around what drives the financial performance of a firm and depending on one’s interest, it could be said to be the company’s strategies, its ability to see and capitalize on business opportunities and innovation, its marketing and branding and so forth. However, looking past all of this, one could also take a narrower approach and study whether or not there are things in a company’s financial statements that could be related to the company’s performance and therefore be argued to be a driver of financial performance in itself [1]. It could however be argued what financial performance is, as there exists a great magnitude of ratios and other formulas for quantifying the financial performance of a company. These measures can be classified as financial ratios from balance sheet and income statements [2, 3] stock market returns and their volatility [4, 5] and Tobin’s q, which mixes market values with accounting values. According to [5], looking at possible financial drivers of performance, the capital structure of the company i.e. the company’s relationship between debt and equity capital, has in many studies been used as an independent variable when studying financial performance in different geographical contexts, years, company’s size, and industries. The existence of a link between a firm’s capital structure and its financial performance has been a hotly debated and researched topic overall several decades in finance research. The starting point of the debate could in many cases be found in the famous Miller and Modligani propositions from the 1950s, which claim that a firm’s performance is independent of its capital structure and that capital structure is a non-dynamic, fixed figure that the company will not change or adapt over time. However, the Miller and Modigliani propositions are only valid in a certain theoretical context and have in research been found to have little empirical support. Instead, many studies have discovered that a company’s capital structure and its relationship to performance, is highly dependent upon context-related issues, such as the company’s industry, strategy, growth or country [6, 7, 8, 5]. Many studies has also pointed out, in opposite to the Miller and Modigliani propositions, that capital structure is an active choice or strategy undertaken by a company and that the choice is dynamic, not fixed over time [5]. The theory of the capital structure is an important reference theory in enterprise’s financing policy. Whether or not an optimal capital structure exists is one of the most important and complex issues in corporate finance. How an organization’s finance is of paramount importance to both the managers of firms and providers of funds. This is because if a wrong mix of finance is employed; the performance and survival of the business enterprise may be seriously affected. This study is to find out an optimum level of capital structure through which a firm can increase its financial performance more efficiently and effectively. Hence, the paper seeks to fill the gap in the literature as a result of limited studies that have been conducted so far in this area using Rwandan context. An attempt was made by [9] studying 10 Nigerian firm but lacked the empirical analysis hence, the call for the study of this nature. Capital structuring is mostly done by listing in stock exchange and the number of listings from emerging markets has grown significantly and [1] observes that more firms have increasingly listed their shares for trading on at least a stock exchange in a country. [10] report that about 3,000 firms had two or more listings in 2008 and highlight that managers’ appetite for listings does not fade, despite increasing market integration. A company is said to be listed when it shares its equity on one or more stock exchange either in a domestic or foreign exchange.

  • Research to date has focused on diversified aspects of ownership structure. However, most studies have concentrated on the influence of ownership structure on firm performance, and there is limited research that explains the relationship between stock listing and financing performance [11 – 17]. Concretely, studies that link capital structure only attempt to identify the determinants of capital structure. [18, 19, 13, 16] have argued that more research should be required and that in-depth investigation of this relationship could provide important insights into capital structure decision, especially in developing economies. Several theories and studies have examined capital structure; however, there is no single theory that can fully interpret the effect of stock listing on firm financial performance. Empirical evidence shows different and contradictory results on this relationship and indicates that it depends significantly on the specific circumstances. Additionally, most previous studies relating to capital structure, [20 – 24] have investigated the determinants of capital structure decisions. [24] argued that there is a lack of empirical evidence on the effect of stock listing on firm performance, especially in emerging markets. The above issues motivated new studies on the relationship between stock market listing and firm financial performance. Specifically, the current study focused on the impact of stock market listing on the financial performance of a listed firm on Rwanda Stock Exchange. Additionally, the current research aimed at filling in the knowledge gap existing in Rwandan context by examining the financial performance of the listed firms in the underdeveloped Rwanda stock exchange while using a quantitative design methodology.


Based on the findings exuding from this study, the following logical conclusions are henceforth presented.

To examine the opportunities that Rwanda Stock Exchange provides to listed companies

There was a reasonable buffer of current assets over current liabilities as an indication of the ability of the firm to pay its debts as and when they fall due for BK and Bralirwa and they did not only have relatively high current ratio but were actually effective in conversion of their accounts receivables. Bralirwa and KCB became more liquid in the years considered under the study and this was proved by the shorter average collection period that these companies instituted in place. This is a viable policy that ensures cash is collected in time hence making the firm more liquid however KCB had high accounts receivable ratio implying it kept its receivables at a low level as compared to BK. As far as fixed asset turnover is concerned, all the three firms were able to master their profitability from minimum investments and this is proven by the high total asset turnover ratio observed in this study. BK had a low debt ratio as compared to the other two implying that it had a greater cushion against debtors’ losses in the event of liquidation while Bralirwa was better for shareholders’ because its low debt ratio implied shareholders were able to expect more earnings. The Debt to equity ratio indicated that BK was more dependent on borrowing hence vulnerable to interest risk spread as compared to the other two.

To examine the performance of listed companies in Rwanda Stock Exchange

Based on the findings on Operating profit, Margins of the three firms, it was observed that BK had a higher ration hence it had low operating costs followed by Bralirwa and lastly KCB while their Net profit, Margin, Return, on Assets and Return on Equity showed a similar trend. It is conclusive that KCB did not perform very well as BK and Bralirwa in the period considered under study. After conducting a comprehensive financial ratio analysis, BK (44 points) ranked first as the most financially healthy, followed by Bralirwa (40 points), then KCB (36 points). To establish the relationship between opportunities in Rwanda Stock Exchange and the performance of listed companies. Given that the correlation between leverage and financial performance was not statistically significant (R = 0.303, P>0.01), and negative with market ratio (0.582, P>0.0) it is concluded that leverage which the firms seek through listing in stock exchange causes financial performance but liquidity may be a possible benefit for listing.


Based on the findings of this study the following recommendations are furthered. The management of the firms need to improve and strengthen their liquidity especially working capital management of BK is affecting the level of liquidity though the firm is still financially sound by finding. Findings of this study may help stakeholders to recognize the link between stock listing and financial performance and choosing appropriate measures to evaluate and analyze the companies’ financial status. The findings of this study suggest that companies depend more on short-term debt than long-term debt. This is probably due to the absence of a well-developed bonds market in Rwanda, where companies can raise enough long-term debt. Liquidity ratios had negative relationship with financial leverage. This means that companies that have high profitability and good performance in Rwanda have less debt and depend more on internal sources of financing thus supporting the pecking order theory. Therefore, the market value of capital structure should be taken more into consideration in evaluating stock listing as it has a stronger link to financial performance than the book value.


  1. Önel, Y.C., & Gansuwan, P. (2012). The Influence of Capital Structure on Firm Performance : A quantitative study of Swedish listed firms.
  2. Degryse, H., de Goeij, P. & Kappert, P. (2012). The impact of firm and industry characteristics on small firms’ capital structure. Small Bus Econ38, 431–447.
  3. Zahra, S. A., & Pearce, J. A. (1989). Boards of Directors and Corporate Financial Performance: A Review and Integrative Model. Journal of Management, 15(2), 291-334.\
  4. Muzir, E. (2011). Triangle Relationship among Firm size, Capital Structure Choice and Financial Performance: some evidence from Turkey. Journal of Management Research, 11 (2), 87-89.
  5. Jonathan P. O’Brien (2003). The capital structure implications of pursuing a strategy of innovation. Strategic Management Journal 24(5)
  6. Berger, A. N., & Di Patti, E. (2006). Capital Structure and Firm Performance: A New Approach to Testing Agency Theory and an Application to the Banking Industry. Journal of Banking & Finance, 30, 1065-1102.
  7. Degryse H., de Goeij P., & Kappert P. (2010). The impact of firm and industry characteristics on small firms’ capital structure. Small Business Economics.
  8. Lindblom, T., Sandahl, G., & Sjogren, S. (2011). Capital structure choices. International Journal of Banking, Accounting and Finance3(1), 4.
  9. Martis, R. N. (2013). Capital Structure and Firm’s Financial Performance – An Empirical Analysis of S&P500. Master Of Finance Thesis, Van Tilburg University. University of Van Tilburg.
  10. Louis Gagnon, G., & Andrew Karolyi (2010). Multi-market trading and arbitrage, Journal of Financial Economics, Volume 97, Issue 1, Pages 53-80, ISSN 0304-405X,
  11. Bokpin, Godfred & Arko, Anastacia. (2009). Ownership structure, corporate governance and capital structure decisions of firms: Empirical evidence from Ghana. Studies in Economics and Finance. 26. 246-256.10.1108/10867370910995708.
  12. Brailsford, T.J., Oliver, B.R., & Pua, S.L. (2002) On the Relation between Ownership Structure and Capital Structure. Accounting & Finance, 42, 1-26.
  13. Samson, E. E. (2012), The Nigerian Capital Market and Economic Development: A Critical Appraisal, International Business Research; Vol. 5, No. 8.
  14. Friend, I., & Lang, L.H. (1988). An Empirical Test of the Impact of Managerial Self-Interest on Corporate Capital Structure. The Journal of Finance, 43, 271-281.
  15. Li, K., Yue, H., & Zhao, L. (2009) Ownership, Institutions, and Capital Structure: Evidence from China. Journal of Comparative Economics, 37, 471-490.
  16. Margaritis, D., & Psillaki, M. (2010). Assets management, equity ownership and firm performance. Journal of Banking & Finance 34, 621-632.
  17. Ruan, W., Tian, G., & Ma, S. (2011). Managerial Ownership, Capital Structure and Firm Value: Evidence from China’s Civilian-Run Firms. Australasian Accounting, Business and Finance Journal, 5, 73-92.
  18. Jiraporn, P., & Liu, Y. (2007). Capital Structure, Staggered Boards, and Firm Value. Financial Analysts Journal. 64. 10.2139/ssrn.1024618.
  19. Nigel, D., & Sarmistha, P. (2007). How Does Ownership Structure Affect Capital Structure and Firm Value? Recent Evidence from East AsiaCEDI Discussion Paper Series07-04, Centre for Economic Development and Institutions (CEDI), Brunel University.
  20. Booth, L., et al. (2001) Capital Structures in Developing Countries. The Journal of Finance, 56, 87-130.
  21. Frank, M. Z., & Goyal, V. K. (2009). Capital Structure Decisions: Which Factors Are Reliably Important? Financial Management, 38, 1-37.
  22. Huang, G., & Song, F. M. (2006). The Determinants of Capital Structure: Evidence from China. China Economic Review, 17, 14-36.
  23. Pandey, N. S. (2001) Principles and Applications of Photogeology. New Age International Limited, India, 1-3.
  24. Titman, S., & Wessels, R. (1988). The Determinants of Capital Structure Choice. The Journal of Finance, 43, 1-19.
  25. Norland-Tilburg, E. V. (1990). Controlling error in evaluation instruments. Journal of Extension, [Online], 28(2). Available at
  26. Mugenda, O.M., & Mugenda, A.G. (1999). Research Methods: Quantitative and Qualitative Approaches. Acts Press, Nairobi.
  27. Ugwu Chinyere Nneoma, Eze Val Hyginus Udoka, Ugwu Jovita Nnenna, Ogenyi Fabian Chukwudi, & Ugwu Okechukwu Paul-Chima (2023). Ethical Publication Issues in the Collection and Analysis of Research Data. Newport International Journal of Scientific And Experimental Sciences (NIJSES) 3(2): 132-140.
  28. Demirguc-Kunt, A. (1992). Creditor country regulations and commercial bank lending to developing countries,” Policy Research Working Paper Series917, The World Bank.
  29. Kaumbuthu, A. J. (2011). The relationship between capital structure and financial performance: a study of firms listed under industrial and allied sector at the NSE.(MBA Dissertation, University of Nairobi), retrieved from

CITE AS: David Nyambane and Zimulinda, Umukesha Marie Noella (2023). The Impact of Stock Market Listing on the Financial Performance of Companies within the Rwanda Stock Exchange (RSE). IAA JOURNAL OF SOCIAL SCIENCES (IAA-JSS) 9(2):53-72.