Determinants of Cost of Capital: Kenyan context

George Onyiego Kengere, Manasseh Njagi, Patricia Luvuno Chonga and Charles Kamau
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George Onyiego Kengere: Postgraduate Student, Department of Business Administration, Technical University of Mombasa
Manasseh Njagi: Postgraduate Student, Department of Business Administration, Technical University of Mombasa
Patricia Luvuno Chonga: Postgraduate Student, Department of Business Administration, Technical University of Mombasa

East African Finance Journal, 2023, vol. 1, issue 1

Abstract: The purpose of this paper was to look at the determinants of the cost of capital for a firm. The study conducted a literature review with the goal of identifying the factors that influence the cost of capital for a firm. The research showed that profitability, liquidity, tax, growth, size, and age of the company are among the major determinants that influence the cost of capital for a firm. Further the research showed a positive correlation between the cost of capital and profitability, liquidity, growth, size, and age of the company. The capital arrangement of a firm is determined on account of the pecking order theory and trade-off theory while bearing in mind the cost elements associated with it. In Kenya, economic stability and political stability are the primary determinants that determine the cost of capital for a firm. This determining factor influences the availability and cost of credit offered by financial institutions in Kenya.

Keywords: Capital Arrangement; Cost of Capital; Profitability; Liquidity; Leverage (search for similar items in EconPapers)
Date: 2023
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Working Paper: Determinants of Cost of Capital: Kenyan context (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:eafjke:2023-01

DOI: 10.59413/eajf/v1.i1.1

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