The relationship between debt financing and the value of the firms quoted at the Nairobi stock exchange
Abstract
Many companies in Kenya rely on debt to finance their operations but many of them have been
put under receivership and eventually liquidated due to inability to pay debt. There was therefore
a need to establish whether there exists any relationship between debt and the value of the firm.
The study sought to establish if there exists any significant relationship between debt and the value
of the firms quoted at the Nairobi Stock Exchange.
To achieve the above objective, regression analysis was used to establish the relationship. The
relationship was found to be weak (Iess than 50%) for a large portion of individual companies
as well as across sectors. T-tests were carried out to assist in accepting or rejecting the
hypothesis. The study failed to reject the hypothesis that there is no significant relationship
between debt and the value of the firm. This means that debt, as a source of financing does not
have any significant effect on the value of the firms, quoted at the Nairobi Stock Exchange.
Citation
Masters in Business Administration, University of Nairobi (2003)Publisher
University of Nairobi. Faculty of Commerce