CAPITAL STRUCTURE ON THE COST OF CAPITAL OF FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA

Kitukutha Mutinda Nicodemus () and Dr. Lucy Wamugo ()

International Journal of Finance and Accounting, 2017, vol. 2, issue 1, 84 - 105

Abstract: Purpose: The purpose of this study is to investigate the effects of CS on the cost of capital of organizationslisted at the NSE. Kenya.Methodology:The study adopted a descriptive research design. The target population for this study were the 41 listed companies on the NSE which were drawn from a list of 65 after applying various exclusion and inclusion criteria. A census of 41 firms was therefore used. Secondary Data for the year 2010 to 2014 was collected from the NSE handbook. Data collected was analysed using descriptive statistics which included means and standard deviations. Inferential statistics such as Pearson correlation and panelregression was also used.The results were presented in form of tables, figures, charts, graphs and trend lines.Results: Based on the findings, the study concluded that there was a significant and positive relationship between asset ratio, total equity to debt ratio, total long term debt to total asset ratio and total short term debt to total asset ratio and cost of capital of firms listed in the NSE. These findings imply that an increase in any of the ratios led to an increase in cost of capital.Policy recommendation:Based on the findings the study recommended that firms should pursue optimum capital structure mix, which will ensure minimum cost of capital. They can do this by focusing on those forms of capital that had lower impacts on cost of capital.

Keywords: asset ratio; cost of capital; total equity to debt ratio; long term debt to total asset ratio; total short term debt (search for similar items in EconPapers)
Date: 2017
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