| dc.description.abstract | The capital structure of a firm is influenced by certain factors.
However what these factors are is still not very clear. Different
researcher5 e.g. Kamere(1987) and Baliga, (1987) Ferri and Jones (1979)
etc.obtained differing conclusions on what the important determinants
ofcapital structure are.
This study aims at first of all determining what the capital
structures of Kenyan public firms are. Secondly, the study tries to find out
on thebasis of other researchers findings, which factors significantly
influence capital structure in the Kenyan environment. The factors which
were tested are The Firms Age, Industrial Class, Growth, Size, Interest
Charges, Variability in Cashflows, Profitability, Asset Structure and
Ownership.
~he study found that though Industrial Class is not statistically
significant, the capital structures of firms on the sectoral basis are
quite different. The Industrial and Allied Sector has the highest
debt-equity ratio of ~.301 followed by the Agricultural Sector with
0.108. Third comes the Financial and Investment Sector with 0.058
and last comes the Commercial and Allied Sector with a ratio of 0.009.
A testwas done to compare the pre-and post-liberalisation capital
structures and the results indicated that the two periods are
significantly correlated implying that liberalisation has so far not created
finally the overseas controlled enterprises.
The results obtained from the other tests indicate that in the
combined run of the sectors, four out of eight factors tested, proved
tobe significantly correlated with capital structure and these were,
Profitability, with a coefficient of 0.65017 Growth in Turnover with a
coefficient of 0.48498, Growth in Ass3t Value with a coefficient of
0.55666 and Asset Str~cture with a coefficient of 0.40354. The least
correlated factor was Interest Charges with a coefficient of 0.06939.
In the Agricultural Sector, the Changes in Movement of Working
Capital was the only factor that turned out significantly correlated
with Capital Structure. The factors Asset Structure and Grwoth in
Turnover both had positive insignificant correlation coefficients
while the factors Profitability, Interest Charges and Turnover had
negative insignificant correlation coefficients with capital
structure.
In the Industrial and Allied Sector, no factor tested had a significant
correlation relationship with Capital Structure though the highest
correlated factor was Growth in Turnover. The least correlated was the
Changes in MovemenCof Working Capital. The factors Profitability and
Interest
positive values of 0.846 and 0.743 respectively. The least
correlated factor was Interest Charges which was negatively correlated
with a coefficient ~f -0.009. The other factors were positively correlated
In the Financial and Investment Sector, no factor tested, showed
any.significant correlation with Capital Structure. However out of
all of them, Profitability was the highest correlated with a coefficient
of0.761. The least correlated was Asset Structure which had a value
of0.09. The factors Changes in Movement of Working Capital and Turnover
both had negative correlation coefficients suggesting opposite movements
with capital structure.
All in all, the results from the sectoral tests do indicate that there
are disparities in the factors that influence Capital Sttructure. Possible
explanations for this are presented in this text however suffice to state
thatmost differences arise from the very natures of sectors themse | en |
