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.


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

The stock market listing provides organisations with financial leverage and in this study financial ratios were used to establish the liquidity of the listed firms after taking the opportunity at the Rwanda Stock Exchange since 2010 till 2015. Accordingly, KCB current assets steadily declining while that of BK’s and Bralirwa’s were steadily increasing. As a supplement to current ratio, quick or acid-test ratio aims to show the more liquid current assets available to pay the more immediately payable liabilities. With reference to current assets, the results are not significantly affected since only inventories are not considered here. The three firms were less likely to carry material amounts of inventories according to the findings. By identifying the most liquid current assets and using them in determining firm’s liquidity, it was shown that KCB steadily declined while Bralirwa steadily increased. However, the liquidity ratios of KCB and Bralirwa increased implying, more of their current assets were immediately realizable when needed. It was shown that though shortening, BK has the longest average collection period and a possible explanation for why it has significantly higher current assets; it takes more than 100 days to collect its receivables. KCB had the shortest average collection period. Among the three, and only Bralirwa demonstrated an improvement in average collection period with the number of days shortening. Based on the findings though the highest among the three, KCB’s activity ratio was steadily decreasing because it kept its receivables at low level. BK’s and Bralirwa’s remained consistent but with four-basis-decline points in the most recent period. Though the highest among the three, KCB’s accounts payable turnover ratio was steadily decreasing which means its paying pattern is becoming longer every year. BK and Bralirwa, on the other hand, were steadily improving. It was found that all three firms kept an effective mechanism on utilizing their property, plant, and equipment to generate sales and Total asset turnover shows that all three firms keep an effective mechanism on utilizing their total assets. In measuring debt ratio, it was found that BK was highly favored and using the perspective of the shareholders, it seems like Bralirwa was highly favored. Striking the balance between two perspectives and using 0.70 as the basis, Bralirwa was highly favored. Debt to equity indicates that BK needed an improvement with Bralirwa relatively hitting the rule of thumb with a decent ratio of debt and equity in its capital structure. The only problem with Bralirwa is that its ratios are steadily declining with KCB the most consistent and stable.

To examine the performance of listed companies in Rwanda Stock Exchange

BK consistently showed the highest operating profit Margin, followed by Bralirwa, and lastly KCB. BK consistently showed the highest Net Profit Margin ratio, followed by Bralirwa, and lastly KCB. As regards KCB, the high 49% ratio was caused by a revaluation increment on land which is deemed to be extraordinary, it doesn’t happen every period. BK consistently showed the highest return on total assets ratio, followed by Bralirwa, and lastly KCB. In the same manner, as regards KCB, the high 20% ratio was caused by a revaluation increment on land which is deemed to be extraordinary, it doesn’t happen every period. As depicted in in the findings, Bralirwa consistently showed the highest Return on Equity ratio, followed by BK, and lastly KCB. In the same manner, as regards KCB, the high 26% ratio was caused by a revaluation increment on land which is deemed to be extraordinary, it doesn’t happen every period.

To establish the relationship between opportunities in Rwanda Stock Exchange and the performance of listed companies

The liquidity ratio was used as an intervening variable. With the intervening variable controlled, 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>0.01). This implies that leverage which the firms seek through listing in stock exchange causes financial performance. The liquidity ratio had strong influence and therefore the relationship was weak though positive.


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.


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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.