Financial Leverage And Firms Growth

Abstract

The study sought to examine how financial leverage affects the growth of listed agricultural firms in Kenya using a panel regression model. Since every firm yearns to either grow externally or internally they make financial decisions on how to get capital to fund such growth through acquiring debt or equity. The study purpose is to contribute to the discussion about the effect of financial Leverage on growth of listed agricultural firms. This paper used annual secondary data available for all listed agricultural firms with NSE and specifically from their audited financial statements and reports, as well as from NSE handbook. Panel regression model was used for estimation in the study. Growth is measure in terms of asset growth where annual assets acquired are aggregated and the percentage changes determined to help track the growth of the firm. The study found leverage and profitability positively impacted firm’s growth while the age of the firm was negatively associated with growth of the firm. The fact that age negatively impacted firm’s growth was contradictory as it expected that as a firm grows in age, then is gains a lot in terms of market share, customers and general industry experience that my help it adapting in both good economic times and tough times.