Joint effects of capital structure, interest rate sensitivity and market value of non-financial firms listed at Nairobi Securities Exchange in Kenya

Abstract

This study sought to address the three variable research entitled, “Joint effects of Capital structure, interest rate sensitivity and market value of non-financial firms listed at NSE in Kenya. The research was based on quantitative approach applying panel data collected from NSE with a population of 32 firms culminating to 320 observations over ten years from 2012-2021. A quantile regression model was applied to test the hypothesis, which reported a significant joint effect relationship of capital structure and interest rate sensitivity on firms’ market value. Further joint analysis equally confirmed that interest rate and debt capital showed a significant inverse relationship, which confirmed that as interest rate increases, so does the reduction of uptake of debt capital. Finally, the findings could authoritatively be recommended for adoption by stakeholders for making financial management decisions like merger and acquisition, balancing of debt and equity in the capital structure taking into consideration interest rate trends, trading off of debts or investing in new ventures. The result equally can be specifically extended further to; government policymakers, scholars and non-financial sector managers who would find the findings applicable in their areas of specialty besides learning from the challenges addressed.