The relationship between business life cycle and capital structure of companies listed at the Nairobi securities exchange

Abstract

Most if not all finance managers are daunted with the task of minimizing the cost of capital and at the same time maximizing the value of their firms. The study focused on determining the interaction between capital structure and business lifecycle of Kenyan listed firms. The design adopted was cross sectional descriptive and 65 listed firms were targeted. Census was used and information was gathered from secondary sources over a period of 6 years (2013-2018). The study conducted an analysis using means, standard deviations and regression analysis. The study noted that business life cycle significantly predicts the capital structure of the entity. The study concluded that firms in different business life cycles are characterised by different components of capital structures. The study recommends that any firm that seeks to optimize its capital structure should first of all determine and establish its business life cycle. The finance managers should therefore pay close attention on business life cycle as they make decisions regarding the use of debts or equities which are the key components of capital structure in any business entity.