Since the 18th century, Mauritius was well-known for the securities firm activities even though the island was still a Gallic settlement. The economic take-off in the early 1980 ‘s has created a favourable environment for the development of a well-built fiscal sector. In this position, the Stock Exchange of Mauritius Ltd ( SEM ) , a private limited company was established to run and back an efficient, liquid carnival and crystalline securities market.
Since its beginning, the stock market has made a important part to the deepening and the enlargement of the fiscal sector in Mauritius. In its hunt to fit the criterion of services available on refined markets, the Stock Exchange of Mauritius has in recent old ages brought approximately important betterments to the services that it offers viz. , the move towards daily trading, the airing of day-to-day market information and the puting up of the Central Depository and Settlement System.
Presently, the SEM operates three markets ; the official market, the Development and Enterprise market ( DEM ) and the nonprescription market. With the execution of the DEM, OTC market will increasingly be closed scheduling for January 2007.
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The SEM was recognized under the Stock Exchange Act 1988. Under the proviso of this Act, the SEM has the sole rights to run, manage and keep the stock exchange in Mauritius. The SEM operates under the control and supervising of the Financial Services Commission, the stock market ‘s regulative organic structure and is managed by its board of Directors.
OBJECTIVES OF STOCK EXCHANGE OF MAURITIUS
The chief aims of the SEM as stated by the Stock Exchange Act are:
To allow and keep to the satisfaction of the committee adequate and decently equipped premises for the behavior of its concern.
To run and keep the Stock Exchange
To offer installations for purchasing, selling and covering in securities in the Stock Exchange and
To put up a glade service under the Securities ( cardinal depositary, glade and colony ) Act 1996
The SEM besides has the right to follow regulations regulating the behaviour of its members and listed companies and to take a firm stand on these regulations.
Dessimination of Market Information
The SEM publishes critical market information and appropriate statistics to assist its members and likely investors. Therefore, the SEM has created two indices viz. the SEMDEX and the SEM-7 and publishes day-to-day information in regard of same to demo the market motions and tendencies. The SEMDEX is an index of monetary values of all listed portions whereas the SEM-7 comprises of the seven largest suited portions of the official list.
Similarly, the SEM publishes of import stock market ratios such as the dividend output ratio, monetary value net incomes ratio, volume of portions traded amongst others in regard of listed companies to assist prospective investors to do better informed determination prior to puting in a peculiar company.
Restrictions and Efficiency of the SEM
Even if there has been an addition in the figure of single investors on the market from around 6,000 in 1991 to over 40,000 at the terminal of 1998, the latter figure still represents about 7-8 % of the entire population. In fact, although good corporate consequences, local investors tend to switch off from the market. Both the person and institutional investors tend to adhere to their retentions. This hence leads to excessively much upward force per unit area on monetary values under dining market conditions every bit good as deficiency of demand for undervalued stocks leadings to undue downward force per unit area on monetary values during bearish periods. Furthermore, the Mauritanian background tends towards lodging money in Bankss instead than puting in securities.
In add-on, the market turnover ratio of the SEM for the past old ages is about 5 % on norm which means that there is low degree of liquidness on the stock market. In such fortunes, low liquidness leads to high monetary value volatility and renders entry and issue conditions hard. Therefore, the market becomes less information efficient.
As a consequence, the Mauritanian market is far from the authoritative capital market. Surely, the SEM, by virtuousness of the size of the economic system and the limited concern landscape, does non demo the comprehensiveness and deepness of sophisticated stocks markets. Besides, unlike developed states where the stock markets are supposed to loosely retroflex the economic system, this is non the instance in Mauritius. For illustration, none of the largest export-oriented and cardinal GDP subscriber garments makers is listed on the official market. Furthermore, there is a moderately high grade of market concentration therefore reflecting the peculiar characteristic of the Mauritian concern which is dominated by a few big companies and pudding stones.
OVERVIEW OF THE STUDY
There is a demand of academic research at the domestic degree and fiscal directors of Mauritian listed companies are presently looking ways to fund growing. An empirical analysis will assist to cognize how capital construction theories work in little developing economic system like Mauritius. Besides, such a research survey will besides assist to react whether Mauritanian fiscal director should truly worry about or follow a specific scheme to cover with the suited mix of debt and equity to finance their house ‘s assets.
There is besides a possibility to prove whether the pick of debt/equity instruments are influenced by factors such as company size concern hazard, revenue enhancement shield effects, growing chances, , liquidity place of houses and the composing of company ‘s plus.
The survey will utilize informations published in the Handbook of SEM for period get downing 1999-2009 and consists of 15 companies listed on the Official market. This method represents a consistent beginning of information since the companies are capable to reexamine and follow with accounting criterions, Torahs and the listed regulations of the SEM.
Harmonizing to the listed regulations, the SEM has the undertaking of guaranting the operation of a market based on transparence and good administration. Therefore, listed companies have to detect a figure of station listing demands viz. :
Presentment of any ownership of portions of another company
Submission of one-year studies and histories
Presentment of any alteration in the Memorandum or articles of Association ; any alteration in board of directors and any determination to pay dividend ; and
Presentment of any proposed alteration in the capital construction, issues and salvation of securities.
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