CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF AGRICULTURAL COMPANIES LISTED IN NAIROBI SECURITIES EXCHANGE, KENYA

Abstract

This study sought to determine the influence of capital structure on financial performance of agricultural companies listed in NSE. The study adopted longitudinal research design with targeted population being the six agricultural companies listed in NSE. Secondary data was obtained from published financial statements for the period 2010-2014. Desk research instrument was used to obtain the data. Census was carried on the six companies listed in the NSE. The empirical data was analyzed using the Statistical Package for Social Sciences (SPSS), to establish the relationship between the variables for study. Pearson’s Correlation Coefficient and Multivariate Regression Analysis was used. The findings of this study showed that an increment in debt ratio will lead to an increment in financial performance, and debt-equity combinations increase will lead to a significant reduction in after tax profits of the companies and capital structure affects financial performance. The study recommends that debt ratio and debt-equity to be well managed for performance to be realized.