The Effect of Capital Structure on Stock Returns at Nairobi Securities Exchange: a Sectoral Analysis

Abstract

The study’s objective was to determine the effect of capital structure on stock returns at Nairobi securities exchange: a sectoral analysis. The researcher adopted an empirical research design. In this case, data was gathered relating to capital structure on stock returns of firms quoted in the Nairobi Securities Exchange over a five year period between 2011 and 2015. The target population for this study therefore comprised of 48 presently listed companies in the Nairobi securities Exchange’s main segment. This study collected secondary data relating to stock returns of the listed companies at the Nairobi Stock Exchange for the period 2011 to 2015. Secondary data was collected from the annual reports of the publicly listed companies. Data analysis method was based on Pearson correlation analysis and a multiple regression model conducted on Statistical Package for Social Sciences (SPSS) on the accounting based measures of firm’s capital structure used in this study. Adjusted R Square value and Analysis of Variance (ANOVA) was used to test the significance of the model. The researcher then presented the findings using appropriate graphs and tables. Research findings indicated that there is no relationship between capital structure and stock returns for firms listed in the NSE.