This paper scrutinizes Determinants of Capital Structure: A study on some selected corporate firms in Bangladesh. We have taken 10 out of 37 listed companies of DSE dividing into two sectors i.e. Pharmaceuticals and chemicals and Tannery sector, five years data from 2013 to 2017 has been collected from respective annual reports. Total number of observations was 50. There are different factors that affect a firm's capital structure decision. We use leverage (D/E ratio) as dependent variable and independent variables are profitability, tangibility, tax, size, growth, non-debt tax shield (NDTS) and financial costs. By using Descriptive Statistical Analysis, Correlation Analysis and Regression Analysis tools we find that Tangibility, size, NDTS, and financial costs are positively related with leverage and Profitability, tax, and growth are negatively related with leverage. In our analysis we see profitability, tangibility of asset, growth and non-debt tax shield have significant association. So when we take capital structure decision of the above firms we should consider profitability, tangibility of asset, growth and non-debt tax shield because other independent variables are insignificant in the context of Bangladesh economy.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This paper scrutinizes Determinants of Capital Structure: A study on some selected corporate firms in Bangladesh. We have taken 10 out of 37 listed companies of DSE dividing into two sectors i.e. Pharmaceuticals and chemicals and Tannery sector, five years data from 2013 to 2017 has been collected from respective annual reports. Total number of observations was 50. There are different factors that affect a firm's capital structure decision. We use leverage (D/E ratio) as dependent variable and independent variables are profitability, tangibility, tax, size, growth, non-debt tax shield (NDTS) and financial costs. By using Descriptive Statistical Analysis, Correlation Analysis and Regression Analysis tools we find that Tangibility, size, NDTS, and financial costs are positively related with leverage and Profitability, tax, and growth are negatively related with leverage. In our analysis we see profitability, tangibility of asset, growth and non-debt tax shield have significant association. So when we take capital structure decision of the above firms we should consider profitability, tangibility of asset, growth and non-debt tax shield because other independent variables are insignificant in the context of Bangladesh economy.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This research investigates the determinants of the capital structure of firms listed service sector on BIST(Borsa Istanbul) and the adjustment process towards this target. The econometric analysis employs the Generalized Method of Moments estimators (GMM-Sys, GMM difference) techniques that controls for unobserved firm-specific effects and the endogeneity problem. The findings of the paper suggest that firms have target leverage ratios and they adjust to them relatively fast. Consistent with the predictions of capital structure theories and the findings of the empirical literature, the results of this paper suggest that size, assets tangibility, profitability, growth opportunity except earnings volatility have significant effects on the capital structure choice of hotels and restaurants.The capital structure or leverage is measured by total debt ratio. Analysis results indicates that firms with high profits, sizable, high fixed assets ratio and high total sales and more growth opportunities tend to have relatively less debt in their capital structures.
This research work investigated the influence of firm size on the financial performance of deposit money banks quoted on the Nigerian stock exchange. The research work is necessitated by the need to find the factors that respond positively or negatively to the financial performance of deposit money banks in Nigeria. Five deposit money banks were sampled with the aid of Taro Yemeni sampling technique to represent the entire banking industry in Nigeria. The firm size proxied by log of total assets represents the explanatory variable while the financial performance measured by profitability proxied by return on asset is the dependent variable. The analysis was conducted using the pooled OLS regression and fixed effect/random effect regression with the aid of STATA for panel regression. In addition, descriptive statistics and correlation analysis were computed. The finding of the study indicates that firm size insignificantly negatively influenced financial performance as a result of diseconomies of scale. The study therefore recommends that the industry should minimize the cost of expansion and enjoy maximum benefits of economies of scale in addition to other factors that may stimulate financial performance should be considered instead of the firm size that indicate insignificantly negative effect.
Corporate debt policy remained a significant, but a challenging decision for managers entrusted with the responsibility to improve the value of the firm. Thus, this study examines the factors influencing the capital structure decisions of firms in Nigeria. The study employs a panel data regression model to analyze data from firms in Nigeria for the period 2011 to 2015. The result of the empirical analysis reveals that firms in Nigeria have a preference to finance economic operations from retained earnings and the use of short-term debt on rollover basis. The finding of this study confirms that debt decreases with profitability and growth opportunities. The findings show that asset tangibility and firm size have a positive and significant relationship with debt policy of firms in Nigeria. The analysis also reveals that managerial ownership has a negative and significant relationship with debt ratio of firms in Nigeria. The study shows a non-significant positive relationship between non-debt tax shields and debt. The study demonstrates that the trade-off and pecking order theories both explains the factors influencing capital structure decisions of firms in Nigeria. Therefore, this study suggests the need for stakeholders to develop the financial markets and make it accessible for firms to obtain long-term financing for economic growth and development.
SME Manufacturing Credit Risk Model Forecast Correctness and Result of ModelIOSR Journals
Thai SMEs employ about 69 percent of the total population. However, SMEs structure of short term financial characteristics as they depend mostly on short term loan. Thus, we have to be aware of financial distress of SMEs. This study utilizes a Logit analysis model to examine financial ratio of 385 SMEs financial statements. The result showed that those of 37 financially distressed and 348 non-financially distressed enterprises. This study conducted with 2 research questions which are (1) Are there significant differences in liquidity, leverage and profitability ratios of financially distressed and non-financially distressed Thai SMEs. (2) Is Logit model is a good model for measuring liquidity, profitability, and financial leverage classifies Thai financially distressed. The study has examined empirical evidence from Thailand manufacturing industries to identify differences between financial profiles of financially distressed and non-financially distressed SMEs. It then developed and tested the Logit analysis model for predicting SMEs financially distress. The first hypothesis is supported, which showed that there are statistically significant differences between financial ratios of financially distressed and non-financially distressed SMEs in Thailand. The second hypothesis showed that the predictable of financial ratios in the Logit analysis model enables classifying Thai financially distressed and non-financially distressed SMEs more accurately than a possible occasional classification. Finally, this study could help policy-makers, SMEs owners and business consultants to determine strategies in order to develop Thai SMEs manufacturing Industry sustainably. Moreover, the Logit model of this study could be applied in other industries in order to expand the growth of Thailand industries.
EXPERIMENTAL STUDY ON ANCHORAGE BOND IN HIGH STRENGTH REINFORCED CONCRETE BEAMS IAEME Publication
This paper discuses experimentally the effect of steel bar diameter and embedment length on
the bond stresses, bond stress versus slip relation, failure pattern and load versus deflection
response of high strength reinforced concrete beams with dimensions (100 mm width x200 mm
height x1100 length). Four beams specimens were provided with three embedment lengths (80
mm), (100 mm) and (120 mm) in addition to two different bar diameters (10mm) and (16mm). The
test results concluded that the bond stresses and the relative displacement decrease with increasing
the embedment length and bar diameter.
This research investigates the determinants of the capital structure of firms listed service sector on BIST(Borsa Istanbul) and the adjustment process towards this target. The econometric analysis employs the Generalized Method of Moments estimators (GMM-Sys, GMM difference) techniques that controls for unobserved firm-specific effects and the endogeneity problem. The findings of the paper suggest that firms have target leverage ratios and they adjust to them relatively fast. Consistent with the predictions of capital structure theories and the findings of the empirical literature, the results of this paper suggest that size, assets tangibility, profitability, growth opportunity except earnings volatility have significant effects on the capital structure choice of hotels and restaurants.The capital structure or leverage is measured by total debt ratio. Analysis results indicates that firms with high profits, sizable, high fixed assets ratio and high total sales and more growth opportunities tend to have relatively less debt in their capital structures.
This research work investigated the influence of firm size on the financial performance of deposit money banks quoted on the Nigerian stock exchange. The research work is necessitated by the need to find the factors that respond positively or negatively to the financial performance of deposit money banks in Nigeria. Five deposit money banks were sampled with the aid of Taro Yemeni sampling technique to represent the entire banking industry in Nigeria. The firm size proxied by log of total assets represents the explanatory variable while the financial performance measured by profitability proxied by return on asset is the dependent variable. The analysis was conducted using the pooled OLS regression and fixed effect/random effect regression with the aid of STATA for panel regression. In addition, descriptive statistics and correlation analysis were computed. The finding of the study indicates that firm size insignificantly negatively influenced financial performance as a result of diseconomies of scale. The study therefore recommends that the industry should minimize the cost of expansion and enjoy maximum benefits of economies of scale in addition to other factors that may stimulate financial performance should be considered instead of the firm size that indicate insignificantly negative effect.
Corporate debt policy remained a significant, but a challenging decision for managers entrusted with the responsibility to improve the value of the firm. Thus, this study examines the factors influencing the capital structure decisions of firms in Nigeria. The study employs a panel data regression model to analyze data from firms in Nigeria for the period 2011 to 2015. The result of the empirical analysis reveals that firms in Nigeria have a preference to finance economic operations from retained earnings and the use of short-term debt on rollover basis. The finding of this study confirms that debt decreases with profitability and growth opportunities. The findings show that asset tangibility and firm size have a positive and significant relationship with debt policy of firms in Nigeria. The analysis also reveals that managerial ownership has a negative and significant relationship with debt ratio of firms in Nigeria. The study shows a non-significant positive relationship between non-debt tax shields and debt. The study demonstrates that the trade-off and pecking order theories both explains the factors influencing capital structure decisions of firms in Nigeria. Therefore, this study suggests the need for stakeholders to develop the financial markets and make it accessible for firms to obtain long-term financing for economic growth and development.
SME Manufacturing Credit Risk Model Forecast Correctness and Result of ModelIOSR Journals
Thai SMEs employ about 69 percent of the total population. However, SMEs structure of short term financial characteristics as they depend mostly on short term loan. Thus, we have to be aware of financial distress of SMEs. This study utilizes a Logit analysis model to examine financial ratio of 385 SMEs financial statements. The result showed that those of 37 financially distressed and 348 non-financially distressed enterprises. This study conducted with 2 research questions which are (1) Are there significant differences in liquidity, leverage and profitability ratios of financially distressed and non-financially distressed Thai SMEs. (2) Is Logit model is a good model for measuring liquidity, profitability, and financial leverage classifies Thai financially distressed. The study has examined empirical evidence from Thailand manufacturing industries to identify differences between financial profiles of financially distressed and non-financially distressed SMEs. It then developed and tested the Logit analysis model for predicting SMEs financially distress. The first hypothesis is supported, which showed that there are statistically significant differences between financial ratios of financially distressed and non-financially distressed SMEs in Thailand. The second hypothesis showed that the predictable of financial ratios in the Logit analysis model enables classifying Thai financially distressed and non-financially distressed SMEs more accurately than a possible occasional classification. Finally, this study could help policy-makers, SMEs owners and business consultants to determine strategies in order to develop Thai SMEs manufacturing Industry sustainably. Moreover, the Logit model of this study could be applied in other industries in order to expand the growth of Thailand industries.
EXPERIMENTAL STUDY ON ANCHORAGE BOND IN HIGH STRENGTH REINFORCED CONCRETE BEAMS IAEME Publication
This paper discuses experimentally the effect of steel bar diameter and embedment length on
the bond stresses, bond stress versus slip relation, failure pattern and load versus deflection
response of high strength reinforced concrete beams with dimensions (100 mm width x200 mm
height x1100 length). Four beams specimens were provided with three embedment lengths (80
mm), (100 mm) and (120 mm) in addition to two different bar diameters (10mm) and (16mm). The
test results concluded that the bond stresses and the relative displacement decrease with increasing
the embedment length and bar diameter.
The Impact of Capital Structure on the Performance of Industrial Commodity an...IJEAB
This paper investigates the impact of capital structure on the performance of commodity and service firms listed on the Vietnamese Stock Exchange. Data used in the paper were collected from the 142 firms listed on Ho Chi Minh and Ha Noi Stock Exchange during time 2009-2015. By using the descriptive statistics and linear regression model, the findings shows that there is negative relationship between capital structure (e.i. STD. LTD and DA) and peformance of the firms (i.e. ROE) for the commodity and services firms listed on two given Stock Exchange Market of Vietnam. Following are possible implications for the study.
Study of the Static Trade-Off Theory determinants vis-à-vis Capital Structure...inventionjournals
This paper investigates the application of the Static Trade-Off theory regarding the capital structure of the Pakistani Chemical Industry. We have used panel data analysis for the sample of 31 listed chemical firms from the period 2005 to 2013. The study is unique in its type as unlike to Shah & Hijazi (2005) who studied many industrial sections, this study only focuses on the listed Chemical Firms. We used five independent variables such as Profitability (P), Tangibility (T), Liquidity (L), Firm Size (FS) and Total Assets Growth (TAG) to study the effect on independent variable Financial Leverage (FG). The results confirmed the relationship of Profitability, Liquidity and Firm Size. However the results were not confirmed for Tangibility and Firm Assets Growth. Even though the results for Tangibility were positive, however the significance of the coefficients failed to support the hypothesis. This study hold a unique position for researchers for future research and also has significance for the investors helping them to make wise investment decisions when investing in Pakistani Chemical Industry since this industry holds a major portion of industrial GDP of the country
Intellectual capital: A modern model to measure the value creation in a businessAI Publications
Using a sample of 92 patients, this study looked into the impact of intellectual capital on the efficiency of private hospitals. The researchers used a quantitative approach to assess the effect of Intellectual capital (Human capital, Structural capital, and Relational capital) on long-term competitive advantage in private hospitals in Iraq's Kurdistan region. The research sample was selected using a random sampling method and conducted in various locations across Iraq's Kurdistan province. A total of 110 questionnaires were distributed, but only 92 people correctly completed them. The findings revealed that the most effective relationship with firm success was between human capital as an element of Intellectual capital, while the least effective relationship was between ownership as an element of Intellectual capital. Furthermore, our findings indicate that finance managers should use debts as a last resort in terms of intellectual capital. Finally, our research can be improved by using more controlled variables, a greater sample size, and data from a longer time span in the regression models. Other methods and steps can be used as well.
Impact of Firm Specific Factors on Capital Structure Decision: An Empirical S...Waqas Tariq
Abstract This study attempts to explore the impact of firm specific factors on capital structure decision for a sample of 39-firm listed on Dhaka Stock Exchange (DSE) during 2003-2007. To achieve the objectives, this study tests a null hypothesis that none of the firm’s specific factors namely profitability, tangibility, non-debt tax shield, growth opportunities, liquidity, earnings volatility, size, dividend payment, managerial ownership, and industry classification has significant impact on leverage using estimate of fixed effect model under Ordinary Least Square (OLS) regression. Checking multicollinearity and estimating regression analysis through Pearson correlation and autoregressive mode respectively this study found that profitability, tangibility, liquidity, and managerial ownership have significant and negative impact on leverage. Positive and significant impact of growth opportunity and non-debt tax shield on leverage has been found in this study. On the other hand size, earnings volatility, and dividend payment were not found to be significant explanatory variables of leverage. Results also reveal that total debt to total assets ratios are significantly different across Bangladeshi industries. Keywords: Capital structure, Leverage, Firm’s specific factors, Dhaka Stock Exchange Bangladesh.
The purpose of this research was to empirically investigate the effect of capital structure on financial sustainability
of deposit-taking micro finance institutions (DTMs) in Kenya. The specific objectives were to determine the impact
of debt on the financial sustainability of DTMs in Kenya, to assess the influence of retained earnings on the financial
sustainability of DTMs in Kenya, to examine the effect of ordinary share capital on the financial sustainability of
MFIs in Kenya, and to investigate the impact of preferred share capital on the financial sustainability of DTMs in
Kenya. The target population of the study was all the 13 DTMs in Kenya registered with the Central Bank of Kenya.
Secondary data was collected on all the DTMs financial data from the Central Bank of Kenya reports. Data was
analyzed using multiple regression model using SPSS and R as the data analysis tool. Based on the findings 76.9%
of the DTMs did not earn enough revenue to cover the actual financing direct costs, which include the total operating
costs, loan loss provisions and the financing costs but excluding the cost of capital. The analysis of variance
(ANOVA) table indicated that the predictor variables influenced the predictor variable significantly at 5%
significance level. Among the four variables; debt and retained earnings were statistically significant variable at 5%
significance level with 1.265 and 1.630 coefficient respectfully. Whereby the financial sustainability change by
1.265 and 1.630 for every unit change of debt or retained earnings respectfully. Therefore, for the deposit-taking
microfinance institutions to remain afloat in the lending business, they should utilize any borrowing opportunity,
plough back profits to the business, and low proportion of preferred share capital. Deposit-taking microfinance
institutions should avoid usage ordinary share capital as it negatively affected financial sustainability
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
A Comparative Analysis of Capital Structure between Banking and Non-Banking F...iosrjce
This research aims to compare the capital structure of Bangladeshi banking and non-banking
financial institutions through some measurements. The annual financial statements of 10 commercial banks and
10 non-bank financial institutions were used for this study which covers a period of five (5) years from 2009-
2013. The study assesses the capital structure of the banking and non-banking sectors measured by total debt
to equity ratio (DER), total debt to total funds ratio and performance by ROE, ROA, EPS.Descriptive statistics,
t-test have been used to show the differences between banking and non-banking capital structure and
performance. However this study concludes that there is no significant difference between Bank and non-bank’s
EPS but there is a significant difference between Bank and non-bank’s D/A ratio and D/E ratio and ROA and
ROE.
Determinants of Capital Structure in Indonesian Banking Sector inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Capital Structure Determination, a Case Study of Sugar Sector of Pakistan Fa...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Similar to An assessment of capital structure decisions by small and medium enterprises in kenya (20)
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...PaulBryant58
This article provides a comprehensive guide on how to
effectively manage the convert Accpac to QuickBooks , with a particular focus on utilizing online accounting services to streamline the process.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
Set off and carry forward of losses and assessment of individuals.pptx
An assessment of capital structure decisions by small and medium enterprises in kenya
1. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
An Assessment of Capital Structure Decisions by Small and
Medium Enterprises in Kenya
Monicah Muiru* Simon M Kamau
Lecturer, Faculty of Commerce, Department of Accounting Finance and Management Science, Egerton
University, Nakuru Town Campus College, P.O Box 13357, Nakuru-Kenya
*E-Mail of the corresponding author: mshirom@yahoo.com
Abstract
Many theories and empirical research that explain the determinants of capital structure, originated in the
developed economies. These studies focus on large firms that issue complex financial securities for both debt
and equity. Very little research has been carried out to establish the determinants of capital structure in emerging
and the less developed countries. This research was done to establish whether the determinants of capital
structure identified in the developed world are the same determinants of capital structures of Small and Medium
Enterprises in developing countries. The study establishes that age, profitability, size, growth opportunities and
tangible assets of the business greatly determine the leverage of the business. The study’s significance lies in the
provision of newevidence on the determinants of capital structure of small and medium enterprises in developing
countries with a special focus on Kenyan firms.
Keywords: Capital structure, Small and Medium Enterprises, Kenya.
1.1 INTRODUCTION
Corporations mainly raise capital through debt and equity. According to Brigham and Ehrhardt (2005),the mix of
debt and equity used by a firm to finance investments in real assets is known as the firm’s capital structure. Debt
financing encompasses term loans, commercial paper, corporate bonds among others while equity financing
refers to the funds provided by the owners. Baker and Martin (2011) point out thatcapital structure is one of the
most important decisions made by financial managers. This is because the mix can have an effect on the overall
cost of capital of a business and hence its value.A firm can be able to create value for its shareholders when its
earnings are more than the cost of investment. Eriotis (2007) notes that the main objective of a finance manager
is to maximize the wealth of shareholder’s and to minimize cost. Therefore, capital structure decisions provide
firms with an effective tool of minimizing their overall cost of capital.
According to Abor (2007), capital structure decisions are essential because of the fact that they have an
impact on the ability of a business to compete effectively. Kajananthan (2012) emphasizes that capital structure
decision is important because the profitability of a firm is directly affected by such decision. This is due to the
fact that high leverage imposes discipline to managers and reduces the agency costs. This increases the
profitability of a firm as managers are forced to act towards meeting the interest of the shareholders. Besides,
capital structure decisionsare vital elements of firms’ financial strategies. Consequently, business organizations
are obliged to choose a mix of debt and equity that will enable them to generate more wealth and at the same
time to maintain stability. Nonetheless, capital structure decisions vary among firms as they try to set a mixture
of debt and equity that would enable them to optimize on their overall market value (Al-Najjar and Hussainey,
2012).
Karadeniz at el (2008) note thata number of studies have identified various factors that determine
capital structure decisions by firms. These factors include, size of the business, growth opportunities, asset
tangibility, profitability and age of a business. However, Upneja and Dalbor (2009) observe that though much
research on the area of capital structure has been done, the conundrum on how firms make capital structure
decisions is still considered as one of the most noteworthy unsolved problem in finance. Al-Najjar and
Hussainey (2011) emphasize that it is still unclear what drives capital structure decisions particularly by small
and medium enterprises (SMEs). Therefore, this paper tries to assess the determinants of capital structure
decisions by SMEs in Kenya.
1.2 The Research problem
Many theories and empirical research that explain the determinants of capital structure, originated in the
developed economies. These studies focus on large firms that issue complex financial securities for both debt
and equity. On the other hand, very scanty research has been carried out to establish the determinant of capital
structure in emerging and in the less developed countries. The little research done in the developing countries
does not explain whether the conclusions from theoretical and empirical research carried out in developed
economies are appropriate for developing countries and in particular to Small and Medium Enterprises (SMEs).
Rajan and Zingales (2000) emphasize that a lot of attention on capital structure has been directed toward large
firms, ignoring the small firms, which are equally important. According to IFC (2006), there is a positive
20
2. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
relationship between a country’s overall level of income and the number of SMEs. In addition, SMEs represent
an important source of innovation. They are a major market for goods and services provided by larger
corporations. The conclusions from these studies were that there were some common features in the capital
structures of firms in different countries. However the studies do not provide specific information on the
determinants of capital structures of SMEs in developing countries. The unresolved question is whether the
various theories and studies are useful in understanding the capital structure of SMEs in the developing countries.
Therefore it is important to understand the factors that determine this combination and have a better grasp on the
variables that influence capital structure decisions of SMEs, which may in-turn help in improving future policy
decisions. It is against this background that this study re-focuses attention to study the capital structure of small
and medium enterprises and bridge the information gap -are the determinants of capital structure identified in
developed world the same determinants of capital structures of SMEs in developing countries.
1.3 Main Objective
The primary objective of the study was to assess the determinants of capital structure of SMEs in Kenya.
1.4 Specific Objectives
1. To identify the determinants of capital structure of SMEs in Kenya
2. To examine the relationship between the size and leverage of SMEs
3. To establish the relationship between the age of SMEs and leverage.
4. To determine the relationship between the availability of tangible assets and leverage of SMEs.
4. To determine the relationship between leverage and profitability of SMEs.
1.5 Research Hypotheses
H01: There is no statistical significant relationship between SME’s size and leverage.
H02: There is no statistical significant relationship between the age and leverage of SMEs.
H03: There is no statistical significant relationship between the availability of tangible assets and leverage of
SMEs.
H04: There is no statistical significant relationship between growth opportunities and leverage of SMEs.
H05: There is no statistical significant relationship between profitability and leverage of SMEs.
2.0 LITERATURE REVIEW
2.1 Theoretical review
2.1.1 Modigliani and Miller theory
According to Modigliani and Miller's proposition I (1958), the value of the firm is not affected by the way the
firm finances its real assets. This implies thatthe proportion of debt financing is irrelevant in determining the
value of the firm.Addae at el (2013) observes that MM theory was based on the argument that capital structure
decision has no effect on a firm’s market value, cost of capital and profitability.However, this theory received a
lot of criticisms because it assumed a world free of taxes which was unrealistic (Gill at el, 2012). Subsequently,
this led to the development of MM proposition I with taxes. According to Brigham and Ehrhardt(2005), MM
proposition I with taxes holds that levered firms have a higher value as compared to the unlevered firms. This is
due to the tax advantage on debt that leads to increasing returns on equity hence shareholders value.
2.1.2 Trade-off theory
The trade-off theory suggests that managers weigh the benefits of debt financing against the costs of borrowing
(Karadeniz at el, 2008). The cost of borrowing includes bankruptcy costs and interest payments. The benefit of
debt financing includes the discipline instilled on the management and the tax allowance on interest payments.
Brigham and Ehrhardt (2005) note that the trade-off theory holds that the value of unlevered firm is equal to the
value of a levered firm plus the value of side effects, which include the expected costs due to financial distress
and the tax shield. When a firm has zero or low levels of debt financing, the likelihood of bankruptcy is low.
According to Baxter (1967), the extensive use of debt increases the chances of bankruptcy and this makes
creditors to demand extra risk premium. Accordingly, firms should not use debt beyond a point where the cost of
debt is higher than the tax advantage. Therefore, the trade-off theory suggests that the optimal capital structure is
the point where the marginal tax benefit is equal to marginal costs related with bankruptcy. According to the
trade-off theory, firms would prefer debt over equity up to the point where probability of financial distress and
bankruptcy costs overweigh the tax benefit associated with debt (Gill at el, 2012).
2.1.3 Agency theory
According to Abor(2007), agency theory focuses on the behavioral relationship between the shareholders or
owners (principals) and the managers (agents). Managers are employed by the shareholders to perform tasks on
their behalf. Addae at el (2013) note thatmanagers may resist high level of debt if they feel that it places their
jobs and income at a risk.Conversely,owners prefer riskier projects because they might generate high returns..
21
3. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
Therefore, corporate policy financing decisions can offer shareholders with a means of minimizing value-reducing
behavior of the management and hence reduce the agency costs. Specifically, the selection of
management leverage dividends and ownership can lessen agency costs arising from the firm's ‘nexus of
contracts’. Brigham and Ehrhardt (2005) argue thatthis convergence of interests between management and
shareholders reduces the agency costs. This is because managers are inspired to follow value maximizing
behavior. Nonetheless, management reduces the diversification of their personal portfoliowhen their equity share
in the firm is increased. On the other hand, a firm can reduce the agency costs by increasing its reliance on debt
financing (Gill at el, 2012). This reduces the need for equity financing, and thus, avoids the related agency costs.
However, the ability of a firm to increasingly depend on on debt financing is restricted due to higher agency
costs of debt that result from the possibility of the business facing bankruptcy.
2.1.4 Pecking Order theory
According to Karadeniz at el (2008), the pecking-order theory relies upon the notion of asymmetric information
between investors (outsiders) and managers (insiders) which guides managers in their preference for raising
funds. According to this theory, firms prefer funds from sources with the lowest degrees of asymmetric
information (Brigham andEhrhardt, 2005). This is because the cost of borrowing rises with increase in
asymmetric information. Myers (1984) emphasizes that the Pecking order theory holds that firms prefer to
finance new investment, first with internally generated finances like retained earnings, followed with debt, and
finally with an issue of new equity.
2.2Empirical Determinants of Capital structure
2.2.1Profitability
There is a general belief that highly profitable organizations are likely to use more debt. The relationship
between leverage and profitability of a firm has been one of the most controversial issues. According to the
pecking order theory, firms prefer to use retained earnings first, then debt financing and finally equity financing
by selling shares in the stock market. This implies that profitable firms tend to use more internal than external
financing, implying a negative relationship between the use of debt financing and profitability. This is consistent
with empirical literature and findings by Harris and Raviv, (1991); Rajan and Zingales, (1995); Booth at el
(2001). on the other hand, profitable firms use more debt to take advantage of the tax shield benefit. In addition,
firms that are profitable and have stable sales are capable of meeting the interest payments with some degree of
certainty.
2.2.2 Firm Size
The size of a firm has a major impact on its capital structure. Large companies tend to be more diversified. This
is because theydo not have high failure rate and they have stable cash flows. Additionally, large firms have
tangible assets which can be used as collateral to obtain debt financing (Ezeoha and Botha, 2011). Thus large
firms are capable of taking on more debt. According to Ferri and Jones (1979) large firms have easier access to
the markets and can borrow at better conditions. Smaller firms, on the other hand, experience difficulties in
raising long-term finances due to unavailability of tangible assets to use as collateral; they have less stable cash
flows and lack the necessary management skills. In addition, small companies are believed to have bigger
bankruptcy costs in relative terms. Therefore the size positively related to leverage in a firm .
2.2.3Firm Age
Younger firms need finances for growth and expansion. Ezeoha and Botha (2011) note that small firms are
typically less creditworthy, less profitable, and less diversified than older firms. They have higher probabilities
of financial distress or bankruptcy. The trade-off theory predicts that younger firms should use less debt than
large firms suggesting a positive relation between firm age and leverage. Informational asymmetry between
insiders and outsiders for young firms are more pronounced because they do not have well established track
records. According to the pecking-order theory such firms should prefer internal equity to private debt, implying
a positive relation between firm age and leverage.
2.2.4 Growth Opportunities
Companies with growth opportunities finance their growth with equity rather than with debt, because equity
financing reduces the chance of the firm been forced into bankruptcy by creditors. Jung et al (1996) suggest that
firms should use equity to finance their growth because such financing reduces agency costs between
shareholders and managers. According to Myers (1977), companies with growth opportunities invest sub-optimally
and therefore creditors are unwilling to lend for long horizons. Therefore, these companies result to
using short-term financing. Also, according to the pecking order theory, growth firms with strong financing
needs will issue short-term securities due to informational asymmetries. This suggests that there is a negative
relationship between growth opportunities and leverage.
2.2.5 Asset Structure (Tangibility)
Firms with valuable tangible assets which can be used as security, tend to use more debt. The availability of
tangible assets has a major impact on the borrowing decisions of a firm because they are less subject to
22
4. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
information asymmetries and they have greater value than intangible assets in case of bankruptcy (Khrawish and
Khraiwesh, 2010). The cost of borrowing can be prohibitively high when firms do not have collaterizable assets;
hence their availability increases firms borrowing opportunities. Bradley at el (1984) found that the asset
structure of a firm was positively related to debt. Furthermore, Marsh (1982) provided indirect evidence of
firm’s tangible assets and the debt. His time series study and report suggested that larger firms with a larger
tangible asset base tended to use more debt. Other empirical studies that explains a positive relation between
availability of tangible assets and the level of debt includes Rajan and Zingales (1995); Krempet al (1999);
Delcoure (2007). These studies demonstrate that there is a positive relationship between the availability of
tangible of assets and use of debt.
23
3.0 RESEARCH METHODOLOGY
3.1Scope and study population
The study employed survey research design. This involved collecting primary data on small and medium firms in
Kenya, using structured questionnaires. The design was selected because similar studies like Titman and Wessel
(1988), which focused on determinants of capital structure, used the same design.
3.2 Sample and Data collection
To obtain a representative sample, a survey sample of thirty businesses was selected using simple random
sampling. This ensured that each business on the list has an equal and independent chance of being selected.Data
was collected from both secondary and primary sources. The secondary data derived from the annual financial
statements. For the primary sources, the data was obtained using self-administered structured questionnaires,
whereby the respondents were asked to complete questionnaires themselves. In some cases one-on-one
interviews were done to extract some important information.
3.3 Data Analysis
The data obtained from the respondent was tabulated for analysis and interpreted with the help of the regression
model. It helped establish the relationship between the dependent variable (leverage) and the independent
variables; size, age, profitability, growth and asset structure (tangibility). The regression analysis was employed
on cross-sectional data from 2008 to 2013.
The regression equation used was:
LEVit = α +β1 Profitabilityit +β2Tangibilityit +β3Sizeit +β4Growthit + β5Ageit + εit
Where:
Variable Definition and measurement
Leverage This is the dependent variable and can be described as the mix of debt and equity
in a firm. It is measured by debt to total assets ratio.
Size It is measured by the Natural logarithm of total assets.
Age Which measured by natural logarithm of firm age.
Profitability Which is measured by EBIT divided by Total assets
Asset Structure Which is measure by Fixed Assets plus Stock divided by Total Assets
Growth opportunities Which is measured by Intangible Assets divided by Total assets
α is the intercept of the equation
β is the slope coefficient for independent variables.
ε Error Term
4.0 Results and Discussions
According to the results in table 1, most of the respondents (78%) indicated that the size of the business
determined its leverage to a great extent while 3 % of the respondents revealed that the size of the business did
not determine leverage of a business. Size had a mean of 4.53 with a standard deviation of 1.042.Table 1 shows
that 86% of the respondents indicated that the age of business determined its leverage by a great extent while 6%
and 5% of the respondents indicated that age determined the leverage of a business by a low extent and by a
moderate extent respectively.Age had a mean of 4.60 and a standard deviation of 1.037. This implies that age of
a business determined the leverage of SMEs in Kenya by a large extent. Furthermore, the results of the study
indicate that most of the respondents (16) perceived that profitability determined the leverage of a business by a
5. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
24
moderate extent.
Table 1: Extent to which Size, age Profitability, Asset structure and growth opportunities determine
leverage
No
extent
Low
extent
Indifferent Moderate
extent
Great
extent
Mean Std
Deviation
Size 1
3%
2
5%
0
0%
4
14%
23
78%
4.53 1.042
Age 1
3%
2
6%
0
0%
2
5%
26
86%
4.60 1.037
Profitability 0
0%
5
16.7%
7
23.3%
16
53%
2
7%
3.50 0.861
Asset
structure
2
5%
2
5%
1
3%
3
11%
23
76%
4.67 0.844
Growth
opportunities
1
3%
0
0%
0
0%
3
11%
26
86%
4.77 0.774
The results in table 1 further show that seventy six percent (76%) of the respondents indicated that the tangible
assets in the business determined the leverage of the business to a great extent. Asset structure had a mean of
4.67 and a standard deviation of 0.844. This suggests that the asset structure determined the leverage of small
and medium enterprises in Kenya by a great extent. Moreover,the study results revealed that majority of the
respondents (86%) indicated that growth opportunities determined the leverage of the business to a great extent
while 11% revealed that growth opportunities determined the leverage of the business to a moderate level. On
the other hand 3% indicated that growth opportunities determined the leverage of the business to a low extent.
Table 2Pearson correlations analysis and 2-tailed tests
Age Size Assets Growth
opportunities
Profitability Leverage
Age of
business
Pearson
Correlation
1 .349(*) .074 .418(*) .070 -.090
Sig. (2-tailed) .035 .662 .010 .682 .597
Size of the
business
Pearson
Correlation
1 .090 .537(**) .086 .111
Sig. (2-tailed) .594 .001 .612 .511
Tangible
assets
Pearson
Correlation
1 .085 -.019 -.122
Sig. (2-tailed) .619 .912 .471
Growth
opportunities
Pearson
Correlation
1 .081 .057
Sig. (2-tailed) .632 .736
Profitability Pearson
Correlation
1 .059
Sig. (2-tailed) .727
Leverage Pearson
Correlation
1
Sig. (2-tailed) .
N 37 37 37 37 37 37
* Correlation is significant at the 0.05 level (2-tailed).
** Correlation is significant at the 0.01 level (2-tailed).
According to the results in table 2, there is a negative correlation between age of the business and
leverage. This means that an increase in the age of the business will lead to a decrease in leverage used. This was
shown by a factor of -0.9. However, the study noted that there was no statistical significant relationship between
the two variables. This suggests that increase in age of a business does not significantly lead to an increase or
decrease in leverage as shown by P value of 0.597 (P>0.05). Table 2 above further shows that there exists a
weak relationship between the size of the business and leverage as shown by a Pearson correlation value of 0.111.
However, the relationship between the two variables was not statistically significant as shown by the P valueof
0.511.
6. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
The results in table 2 indicate that there is a negative correlation between tangibility of business assets and use of
leverage as depicted by a Pearson correlation value -0.122. The degree of significance of the relationship
between the two variables was 0.47. The P value was greater than 0.05 and this means that there is no statistical
significant relationship between tangibility of business assets and leverage. Further, the study established that
growth opportunities and profitability had a weak, positive relationship with leverage with a Pearson correlation
value of 0.507 and 0.509 respectively. However, the relationship of these variables with leverage was not
statistically significant as shown by their significance levels of 0.736 and 0.727 respectively.
Table 3; Regression Analysis
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .227(a) .052 -.101 1.02628
According to the results in table 3 above, the correlation coefficient value was 0.227. This shows that there is a
weak correlation between the independent variables and the dependent variable. Furthermore, the results in table
3 indicate that the independent variables explain only 5.2% of the variations in the dependent variable (leverage)
as shown by the co-efficient of determination value of 0.052.
Table 4 ANOVA Test
Model Sum of Squares df Mean Square F Sig.
1 Regression 1.782 5 .356 .338 .886(a)
Residual 32.651 31 1.053
Total 34.432 36
a. Predictors: (Constant), to what extent does age of the business determine the leverage (use of credit to increase
profits) of the business, To what extent does profitability determine the leverage of the business, To what
extent do tangible assets in the business determine the leverage of the business, To what extent does the size
of the business determine the leverage of the business, To what extent do growth opportunities determine
the leverage of the business.
b. Dependent Variable: Leverage
The results in table 4 show that the overall significance of the model was 0.886 with an F value of 0.338. This
implies that there is no statistical significant relationship between the independent variables (age, size, growth
opportunities, tangible assets and profitability) and leverage (P>0.05).
Table 5 Regression Coefficients
Model Unstandardized Coefficients Standardized Coefficients T Sig.
B Std. Error Beta
1 (Constant) 2.346 1.541 1.523 .138
profitability .003 .011 .051 .291 .773
growth opportunities .113 .480 .051 .235 .816
tangible assests -.008 .011 -.127 -.722 .476
size of the business .201 .290 .146 .692 .494
age of business -.223 .280 -.156 -.799 .430
25
a Dependent Variable: rating the leverage
According to table 5 above, the significance value on the relationship between size of the business and
leverage was 0.494. This value was higher than the p value of 0.05. As a result, this study fails to reject the first
null hypothesis and concludes that there is no statistical significant relationship between size of the business and
leverage. Furthermore, the degree of significance of the relationship between the age of the business and
leverage was 0.430.Therefore, this study fails to reject the second nullhypothesis and concludes that there is no
statistical significant relationship between leverage and size and age of business(P>0.05)
The results in table 5 show that the level of significance on the relationship between asset structure and leverage
was 0.476. This value was higher than the p value of 0.05. Consequently, this study fails to reject the third null
hypothesis and concludes that there is no statistical significant relationship between asset structure and leverage.
Additionally, the significance value on the relationship between growth opportunities and leverage was 0.816.
Thus, this study fails to reject the fourth null hypothesis and concludes that there is no statistical significant
relationship between growth opportunities and leverage. Finally, the degree of significance on the relationship
between profitability and leverage was 0.138. Accordingly, this study fails to reject the fifth null hypothesis and
concludes that there is no statistical significant relationship between profitability and leverage.
7. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
5.0 Summary and conclusions
The aim of the study was to assess the determinants of capital structure decisions by SMEs in Kenya. The study
results revealed thatmajority of the respondents indicated that the size of the business, age of the business,
availability of tangible assets and growth opportunities determined the leverage of SMEs by a great extent.
However, profitability determined the leverage of SMEs by a moderate extent. The results from the correlation
analysis showed that there is a negative correlation between age of the business and leverage. However, there
was no statistical significant relationship between age of the business and leverage. This means that the age of a
business has no significant impact in determining the capital structure of SMEs. Furthermore, the correlation
results showed that size of the business, availability of tangible assets, growth opportunities and profitability had
a positive relationship with leverage. This means that these variables determine firm leverage among SMEs in
Kenya. Therefore, the results of this study suggest that capital structure decisions of SMEs in Kenya are
determined by factors which are similar to those identified in previous literature.
6.0Limitations and Recommendations
The sample for this study was small and the study was limited to SMEs in Kenya. Consequently, the results of
this study can only be generalized to SMEs similar to those which were included in the sample. Additionally,
this study uses factors that influence capital structure decisions that have been identified from previous studies.
As a result, future studies should consider other variables like taxes and operating risk that may potentially
influence capital structure decisions of SMEs. Moreover, further research should be conducted in other mature
and developing countries in order to aid comparability of the results.
REFERENCES
Abor, A.(2007). Corporate Governance and Financing Decisions of Ghanaian Listed Firms. Corporate
26
Governance, 7, 83-92.
Addae, A., Baasi, M., & Hughes, D.(2012). The Effects of Capital Structure on Profitability of Listed Firms in
Ghana. Research Journal of Accounting and Finance, 5, 215-229.
Al-Najjar, B., &Hussainey, K.(2011). Revisiting the Capital Structure Puzzle: UK Evidence. Journal of Risk
Finance, 12, 329-338.
Baker, K., & Martin, G.(2011). Capital Structure and Corporate Financing Decisions. New York, Kolb Series in
Finance.
Baxter, N. (1967). Leverage, risk of ruin and the cost of capital.The Journal of Finance ,22, 395-403
Booth, L., Aivazian, V., Demirguc-Kunt, A. &Maksimovic, V. (2001). Capital structures in developing
countries, the Journal of Finance, 56, 87-130
Bradley, M., & Kim, E .(1984). On the Existence of an Optimal Capital Structure: Theory and Evidence. Journal
of Finance, 2, 857-878.
Brigham, E., &Ehrhardt, M. (2005).Financial Management: Theory and Practice. Mason, Ohio: Thomson
South- Western.
Delcoure, N. (2007). The Determinants of Capital Structure in Transitional Economies.International Review of
Economics and Finance,16, 400-415.
Eriotis, N.(2007). How Firm Characteristics affect Capital Structure: An Empirical Study. Managerial Finance,
33, 321-331.
Ezeoha, A., & Botha, F.(2011). Firm Age, Collateral Value and Access to Debt Financing in Emerging Economy:
Evidence from South Africa. SAJEMS, 1,55-71.
Ferri, M., & Jones, W. (1979). Determinants of Financial Structure: A New Methodological Approach, Journal
of Finance, 34, 631-644.
Gill, A., Biger, N., Mand, h., & Shah, C.(2012). Corporate Governance and Capital Structure of Small Business
Service Firms in India. International Journal of Economics and Finance, 4, 83-92.
Harris, M., &Raviv, A.(1991). The Theory of Capital Structure.The Journal of Finance, 46, 297-355.
IFC (2006).Role of Small-and Medium-sized Enterprise in the Future of Emerging Economies. Earth Trends
2006. World Resources Institute.
Jung, K.., Kim, Y..&Stulz, R. (1996). Timing, Investment Opportunities, Managerial discretion, and the Security
issue decision, Journal of Financial Economics, 42, 159-185.
Kajananthan, R.(2012). Effect of Corporate Governance on Capital Structure: Case of Sri Lankan Listed
Manufacturing Companies. Journal of Arts, Science & Commerce, 3, 63-71.
Karadeniz, E., Kandir, S., Iskenderoglu, O., &Onal, Y.(2011). Firm Size and Capital Structure Decisions:
Evidence from Turkish Lodging Companies. International Journal of Economics and Financial Issues, 1, 1-
11.
Khrawish, H., &Khraiwesh, A.(2010). The Determinants of Capital Structure: Evidence from Jordanian
Industrial Enterprises. Journal of Economics and Administration, 24, 173-196.
8. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.5, No.15, 2014
Kremp, E., Stöss, E., &Gerdesmeier, D.(1999). Estimation of a Debt Function: Evidence from French and
German Firm Panel data. A joint research project of Deutsche Bundesbank and the Banque de France,
Working paper.
Marsh, P., (1982). The Choice between Equity and Debt: An Empirical Study. The Journal of Finance, 1, 121-
27
144
Miller M.,(1977). Debt and taxes, Journal of Finance, 32, 261-275.
Modigliani F and Miller MH (1963).Corporate Income Taxes and the Cost of Capital: A correction. American
Economic Review, 53, 433-443.
Modigliani, F., & Merton H. Miller M. H., (1958). The Cost of Capital, Corporate Financeand the Theory of
Investment.American EconomicReview.4, 261-97.
Myers, S. (1977). Determinants of Corporate Borrowing, Journal of Financial Economics, 5, 147-175.
Myers, S. (1984). The capital structure puzzle, Journal of Finance, 34, 575-592.
Rajan, R., &Zingales, L.(1995). What do we know about Capital Structure? Some Evidence from International
data. Journal of Finance, 50, 1421-60.
Titman, S., &Wessels, R. (1988).The Determinants of Capital Structure Choice.Journal of Finance, 43, 1-19.
Upneja, A., &Dalbor, M.(2009). The Leverage Decision of U.S Casino Firms.Journal of Hospitality and
financial Management, 17, 34-56.
9. The IISTE is a pioneer in the Open-Access hosting service and academic event
management. The aim of the firm is Accelerating Global Knowledge Sharing.
More information about the firm can be found on the homepage:
http://www.iiste.org
CALL FOR JOURNAL PAPERS
There are more than 30 peer-reviewed academic journals hosted under the hosting
platform.
Prospective authors of journals can find the submission instruction on the
following page: http://www.iiste.org/journals/ All the journals articles are available
online to the readers all over the world without financial, legal, or technical barriers
other than those inseparable from gaining access to the internet itself. Paper version
of the journals is also available upon request of readers and authors.
MORE RESOURCES
Book publication information: http://www.iiste.org/book/
IISTE Knowledge Sharing Partners
EBSCO, Index Copernicus, Ulrich's Periodicals Directory, JournalTOCS, PKP Open
Archives Harvester, Bielefeld Academic Search Engine, Elektronische
Zeitschriftenbibliothek EZB, Open J-Gate, OCLC WorldCat, Universe Digtial
Library , NewJour, Google Scholar