Effect of Financial Leverage on Financial Performance of Manufacturing and Allied Firms Listed at the Nairobi Securities Exchange
Abstract
Financing choice is vital to every firm as the optimal capital structure between debt and
equity impacts on the value of the firm as well as its stock prices in the securities market.
However, the optimal capital structure has attracted attention over the past due to its role
in economic growth of a company. This study sought to determine the effect of financial
leverage on financial performance of manufacturing and allied firms listed at the Nairobi
Securities Exchange. To accomplish this objective the study used a descriptive research
design. The population of the study was made up of the 10 manufacturing and allied
firms listed at the Nairobi Securities Exchanges as at 31st December 2016. The study
obtained data from the 10-listed manufacturing and allied firms. This study used
secondary data for a period of 5 years from 2012 to 2016. The secondary data collected
from the annual report of the manufacturing and allied firms was be analyzed using
descriptive statistics, correlation analysis and using the multiple regression method. The
study established there was an insignificant positive relationship between financial
leverage and ROA of the manufacturing and allied firms listed at the NSE. The findings
revealed that the relationship between firm size and ROA was negative and significant
while the relationship between assets structure and ROA is positive and significant.
Further, the research found that the relationship between capital intensity, sales growth
and ROA was negative and insignificant. The study concluded that financial leverage
does not significantly affect the financial performance of manufacturing and allied firms
listed at the NSE.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
The following license files are associated with this item: