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CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE IN KENYA: EVIDENCE FROM FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE


Maina Leonard

Jomo Kenyatta University of Agriculture and Technology, Kenya

Ishmail Mwasa

Jomo Kenyatta University of Agriculture and Technology, Kenya


ABSTRACT

The research aims at establishing, the effect of capital structure on financial performance of firms listed at the NSE. The population of interest of this study was the firms quoted at the NSE, and a census of all firms listed at the NSE from year 2002-2011 was the sample. Secondary data was collected from the financial statements of the firms listed at the NSE. The study used Causal research design and Gretl statistical software to perform the panel Regression analysis. The study concluded that debt and equity are major determinants of financial performance of firms listed at the NSE. There was evidence of a negative and significant relationship between capital structure (DE) and all measures of performance. This implies that the more debt the firms used as a source of finance they experienced low performance. The study also concluded that firms listed at NSE used more short-term debts than long term.


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