The effect of capital structure on the financial performance of small and medium enterprises in Thika sub-county, Kenya

Abstract

Whether the capital structure of a firm should have some effect on the financial performance of small and mediumenterprises is a matter for empirical determination. The objective of this study was to determine the effect ofcapital structure on the financial performance of SMEs in Thika sub-county, Kenya. The study was conducted on40 SMEs which were in operation for the five years 2009 to 2013, using multiple linear regression. The findingswere that there was no significant effect of capital structure,asset turnover and asset tangibilityon the financial performance of SMEs in Thika sub-county, Kenya. Therefore it is recommended that additional research beconducted in order to determine the major factors that influence financial performance of SMEs. This wouldenable these firms control these factors in order to ensure that profitability is maximised.