The determinants of capital structure of private hospitals in Nairobi, Kenya

Abstract

Although the literature on capital structure is vast, hardly any of it is dedicated to the capital structure of non-profit organisations. In this study I investigate the relationship between leverage and profitability, growth, size, liquidity and asset structures of private hospitals in Nairobi. Secondary data available from audited financial statements of three major private hospitals was used for this study. Data collected was analysed through descriptive statistics using SPSS computer package. Regression analysis was used to compute the significance of the relationship between leverage and each factor. The findings from the study indicate all variables; profitability, growth, hospital size, liquidity and asset structure were negatively related to leverage at 95% confidence level. It was asset structure only that had a positive relationship with leverage. In conclusion, it became apparent that private hospitals in Nairobi basically depend on internal funds for their operations. The major limitation of this study was the availability of data from private hospitals. My recommendation is that private hospitals should be encouraged to share information as regards their financial statements so that a further study to be carried out on all the private hospitals in Nairobi to evaluate if there will be a substantial change of the findings. Further research should also be carried out to determine the financing options of other non-governmental organizations.