Effect of financial leverage on corporate investment for non financial firms listed at the Nairobi securities exchange
Abstract
Investment decision always attracts financing decision, hence making financing and
investment relationship a central issue in the study of corporate finance. The objective of
the study was to establish the effect of financial leverage on corporate investment of nonfinancial
firms listed at the Nairobi Securities Exchange for a period of five years (2009 -
2014). A casual research design was adopted for the study. The study made use of
secondary data which was obtained from NSE library, CMA and firm’s annual reports
which are publicly available. Population consisted of 62 listed firms out of which, 45
companies were to be studied. The 17 financial: banks and insurance firms were not
considered due to the regulatory in the sector. The response rate was 82.2% ie 37 firms
out of 45. The research used quantitative techniques in analyzing the data using SPPS
version 21.0 The study found that financial leverage has a significant negative effect on
corporate investment. Liquidity also has a negative effect on investment. The firm’s
decision on investment is directly related to the Cash flow, Profitability, Firm size and
Growth whereas an inverse relationship exists with Leverage and Liquidity. Management
should explore other variables like incentive to managers, good corporate governance and
prudent use of available resources to improve the firm’s performance.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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