An Assessment Of The Determinants Of Capital Structure Of Construction Companies Listed In Nairobi Securities Exchange In Kenya

Abstract

The research project assessed the influence of the capital structure determinants on capital structure of construction companies listed in Nairobi Security Exchange (NSE). Specifically the study was directed towards attaining the following aims: to assess the influence of company size on capital structure, to establish the influence of profitability on the capital structure, to assess the influence of assets tangibility on the capital structure of construction firms, to assess the influence of interest tax shield on the capital structure of listed contraction companies in NSE. The descriptive research design was adopted in the study. The target population was 5 listed construction companies in NSE; Kenya in the period of 2012 to 2016 with focus on the capital structure determinants. Data was made available by the use of secondary data forms which captured details from published annual financial reports. The collected data was studied, analyzed and evaluated by use of descriptive analysis like mean and standard deviations, regression was used to determine the relationships between study variables while inferential statistics was done to test hypothesis in order to make inferences. The analyzed result was presented using tables. The findings indicated that retained earnings were determined by profitability of the firm while debts were determined by assets tangibility and interest tax shield. Firm equity was determined by firm size and asset tangibility. The study found that firm size affected debts, assets tangibility affected equity, and profitability determined retained earnings while interest tax shield encourages use of debt finance. In conclusions the study concluded that; Firm size was statistically significant to debts capital, asset tangibility was significant to equity, profitability related positively with retained earnings and interest tax shield was led to use of debts finance. The study recommended that; Companies should improve on their firm size either by short-term debts or in terms of total assets.