The Effect of Debt Financing on Financial Performance of Private Secondary Schools in Kajiado County

Abstract

Debt financing decision is among the key financial decisions that are taken by firms since debt financing has an effect on the financial performance. Leverage financing provides the borrower with an opportunity to finance an investment on a short term source at the same time spreading the cost of capital over time so as to meet the affordability and budgetary constraints. This study set out to determine effect of debt financing on the financial performance of private secondary schools in Kajiado County. The study applied a descriptive research design and carried out a census of the 61 private secondary schools in Kajiado County. The study used secondary data which was collected using a data collection form. The data collection form obtained data for a period of three years from 2014 to 2016. Multiple linear regression was employed to ascertain the association linking dependent variables and independent variables. The results found that the relationship between debt financing and financial performance of private secondary schools in Kajiado County was positive and insignificant and that the relationship between revenue growth and financial performance of private secondary schools in Kajiado County was positive and insignificant. The study also found that the relationship between administrative efficiency and financial performance of private secondary schools in Kajiado County was negative and significant while the relationship between operational efficiency and financial performance of private secondary schools in Kajiado County was negative and significant. The study concluded that debt financing does not affect the financial performance of private secondary schools in Kajiado County. The study also concluded that administrative efficiency and operational efficiency significantly affect the financial performance of private secondary schools in Kajiado County.