Effects of Lease Financing on the Financial Performance of Companies Listed on Nairobi Securities Exchange

Abstract

described from the choice of the company of leasing in relation to borrowing as well as obtaining the assets. Lease funding as portion of the financing decision of a firm is one of the substitutes to straight-up buying if a company is seeking various ways to get essential business equipment as well as supplies that have the chance of risking the company’s financial flow as well as stock pile. Leasing as a source of finance has proven to be suitable for developing private subdivision in evolution and in low earning area like sub- Saharan Africa. Leasing is considered to be the interesting funding tool for lessors for the reason that it not only permits them evade the normal credit dangers then also to permit the possessions as well as price dangers complicated in wealth to the lessee. The chief aim of the research was to regulate the noteworthy effects of lease funding on the monetary act of corporations registered at NSE. The research assumed descriptive study plan in defining the noteworthy effects of lease financing on performance in financial perspective. The study population consisted all the 65 registered companies at NSE. All firms listed at NSE had not reported use of lease, but only 33 firms which had reported use of lease financing and their secondary data for the period between the year 2011 – 2015 was obtained from annual financial reports of the firms. The gathered secondary statistics from the annual reports and financial statements was evaluated using Statistical Package for Social Science version 20. A reversion examination was carried out on the data set to regulate the significant effect of lease business on the ROA (measure of financial performance) for firms listed at NSE. The results from regression analysis showed, lease financing and liquidity having positive effects on ROA whereas size and leverage had negative effects on ROA.