The Role Of Corporate Tax On The Relationship Between Financing Sources And Profitability Of Manufacturing Firms Listed In Nairobi Securities Exchange, Kenya

Abstract

The purpose of this study was to assess the role of corporate tax on the relationship between financing sources and Profitability of manufacturing firms listed in Nairobi Securities Exchange, Kenya. The specific objectives of the study were to: determine the effect of Retained earnings on Profitability of manufacturing firms, evaluate the effect of Debt financing on Profitability of manufacturing firms and to establish the effect of share capital financing on Profitability of manufacturing firms in Kenya. The research was based on the Simulation and Structural Form Theories. The descriptive and cross sectional research design were employed in the study. The population of the study was the 9 manufacturing firms. Purposive sampling technique was used to select the 8 manufacturing firms. Published financial statements were used to collect secondary data by use of secondary data collection forms. Research experts’ opinion was used to determine the validity. Descriptive statistics like mean and standard deviation and multiple regression analysis was used to analyze data and the results were presented using tables and figures. The study found that profitable firms make more use of retained earnings. The study concluded that: retained earnings related positively with Profitability and the relationship was found to be significant while debt financing had a negative and significant effect on profitability also share capital had a positive but insignificant relationship with profitability, finally corporate tax had a positive but insignificant role in the relationship between financing sources and Profitability. The study recommended that companies to use more of retained earnings if they want to remain competitive in the market.