| dc.description.abstract | The objective of this research was to determine the effects of Capital structure on the
profitability of the listed construction and allied companies in Kenya. Theoretically it is
assumed that the value of a company depends upon the future operating income generated
by its assets and it does not matter what capital structure a company uses to finance its
operations. Multiple linear regression which included Return on equity as independent
variable, total debt, short term debt and long term debt as dependent variables and size and
growth as control variables. These variables were used to establish whether capital
structure decisions affect the profitability of the listed construction and allied companies
in Kenya. Secondary data was collected from 2003 to 2012 and analyzed with the aid of
statistical tools. Descriptive study research design was used to determine the frequency of
occurrence or the extent to which variables were related. The population used in this study
was five construction and allied companies which are all listed in the NSE .The study used
mainly secondary data from the NSE hand book, data relating to the research question was
obtained from the audited financial statements of the respective companies. The
correlation coefficient and coefficient of determination were used to test whether the
expected values of a quantitative variable within several pre-defined groups differed from
each other. The results obtained from the regression equations found out that there was
significantly positive relationship between Total debt, Long term debt, Short term debt
and profitability which implies that an increase in debt position is associated with an
increase in profitability hence firm's performance, The study further found out that
profitability increased with the control variables which were both size and sales growth
From the findings outlined above, The study recommends that companies, should consider
borrowing for funds and putting such funds to economical value so that they can
consequently reap from such projects and increase their profits. Secondly the firm
management should take in to account their size and growths as this also turned to be
critical factors in determining profitability. | en_US |
