Determinants of Debt and Equity in the Real Estate Industry in Kenya

Abstract

This study sought to analyze the determinants of debt-equity decisions among real estate firms in Kenya. The study used primary data collected using semi structured questionnaires. The study administered a total of 30 questionnaires to real estate firms in Nairobi Kenya and obtained 25 filled questionnaires constituting a response rate of 83.3%. A t-test was applied to determine the statistical strength. The questionnaires contained questions that addressed the objectives of between the dependent and independent variables. The results indicate that there were more male that female respondents. Flats and Apartments constituted the largest type followed by the firms operating in the Homes sector. Only a few were operating in the commercial Buildings and Shopping Malls sector each. This indicates that the respondents had adequate working experience to understand the issues sought by the researchers. Capital structure decisions were influenced by opportunities for growth, firm risk, management control, profitability, asset tangibility and firm size. These factors were found to affect decision making in a statistically significant way. The findings of this study support both existing theories and empirical literature. The findings were similar to those of Tongkong (2012), Saddam (2014) and Gharaibeh (2015) who investigated various factors influencing capital structure decision making. The study also confirmed the tradeoff and pecking order theories.