| dc.description.abstract | A firm‟s capital structure refers to the mix of its financial liabilities. It has long been an important issue from the strategic management standpoint since it is linked with a firm‟s ability to meet the demands of various stakeholders. Firm values vary with different level of debt usages. The relationship between capital structure and firm value has been the subject of considerable debate throughout the literature. The study sought to establish to establish the relationship between capital structure and firm value for companies listed at Nairobi Securities Exchange. The causal study design was employed in this research. The study sampled 38 companies that have continuously and actively traded at the NSE for the last five years whereby data was stratified by time periods for periods between years 2009 to 2013. The study used secondary quantitative data to analyze the relationship between capital structure and firm value. Secondary data was obtained by abstraction method from financial statements for the 38 companies to be covered as they have been published by NSE. This data covered the period 2009 to 2013. Descriptive analysis was used to analyze the data. The study used a regression model to predict the extent to which the identified independent variables affect the dependent variable. In this case, SPSS version 18 was used in regression analysis and computation of coefficients. From the above regression model, the study found out that there were factors influencing the firm value of companies listed at the Nairobi Securities Exchange, which are capital structure and size of the firm. They influenced it positively. The study found out that the intercept was 0.645 for all years. The two independent variables that were studied (capital structure and size of the firm) explained a substantial 65.4% of firm value of companies listed at the Nairobi Securities Exchange as represented by adjusted R2 (0.654). The study concludes that capital structure and size of the firm influence the firm value positively. The study recommends that in order for a firm to increase its value it must increase it growth and it size. It further recommends that other studies should be done to determine whether other factors such as debt tax shield, liquidity and growth affects firm‟s value. The study recommends that owing to the less cost incurred in obtaining short term loans than long term ones, companies should go for short term loans since despite changing the firm's capital structure to the worse, this will improve their value as increasing short term debts with a relatively low interest rate will lead to an increase in profit levels which will have a positive impact on firm value. The study suggests that further study can be done on the relationship between capital structure and firm value of firms not listed at the NSE. This will make it easier to do a comparison and see whether the results will be the same | en_US |
