The Effect Of Capital Structure On Profitability Of Oil And Gas Marketing Companies In Kenya

Abstract

Capital iStructure iis iargued ito ihave iinfluence iin iprofitability iof ifirms iacross ivarious isectors iof ian ieconomy. iIt iis ihowever ia ivery idaunting itask ifor ifinance imanagers ito istrike ia igood ibalance ibetween idebt ithe idebt ifinancing iand i ithe iequity ifinancing. iFor iexample, idebt ifinance iis icheaper ithan iequity ifinance ibut iagain iat ihigher ilevels idebt ican ilead ito ifinancial idistress iof ifirms iand iwash iaway iits benefits. iThe icomplexities iaround ithis ibalance iin icapital istructure iare iworsened iby ithe iturbulent inature iin ioil iand igas iindustries iand ithe ifact ithat iit’s ia iprice iregulated iindustry iwith iwholesale imargins ibeing ifixed iby ithe ienergy iregulatory icommission. iA icomprehensive istrategy iaround icapital istructure iis itherefore ineeded ito iensure iprofitability iis imaximized iand ihence ithe ivalue iof ithe ifirms iwhile iat ithe isame imoment i imitigating ithe irisk iof ifinancial idistress. iThis iproject iseeks ito iestablish ithe ieffects iof icapital istructures ion i ithe iprofitability iof ioil iand igas iindustries iin iKenya. iThe istudy isampled iten ioil iand igas imarketing ifirms iout iof iwhich ione ihas ibeen i ilisted iin i iNairobi iSecurities iExchange, ione iis igovernment iowned iwhile ithe iother ieight iare iprivately iowned. iBalanced ipanel idata icovering i2013-2018 iperiod iacross ithe iten ifirms iwas iobtained ifrom irespective ifirms’ iannual ifinancial ireports iand iother irelevant isecondary isources. iData iwas icollected ion ithese ifirms’ iNet iprofit iafter itax, iequity, ilong iand ishort iterm idebts, itotal iliabilities iand iassets. iMultiple ilinear iregression ianalysis i iused ito iestablish ithe ieffects iof ivarious icapital istructures iand icomponents iin ithe ioil ifirms` iprofitability imeasured iusing iROA.. iLong iterm idebts ito itotal icapita ihas inegative iimpact ion ithe ifinancial iperformances iof ithe ioils iand igas imarketing ifirms. iThis iimplies ithat icontinued iincreases iin ithe ilong iterm idebt ito itotal icapital iratios iwill iharm ifinancial iperformances iof ioil iand igas imarketing icompanies iin iKenya. iBoth ishort iterms iand ilong-term idebts ito itotal iliabilities ihave ipositive ieffects ion ithe ifinancial iperformances iof ioils iand igas imarketing ifirms.Its iconcludes ithat icapital istructure ias ia iwhole iplays ian iinsignificant ipart iin ithe iperformance iof ioil iand igas ifirms ibut ilong-term idebts ihas ian iadverse inegative ieffects iand ishould ibe iwatched iby ifinance imanagers iclosely.