FIRM CHARACTERISTICS AND FINANCIAL LEVERAGE OF CONSTRUCTION AND ALLIED COMPANIES LISTED IN NAIROBI SECURITIES EXCHANGES

Author: Kinyua Helen Wairimu

ABSTRACT

Although financing arrangement is dependent on heterogeneous aspects there is no clarity on how firm financial characteristics influence the financial leverage of construction and allied companies. Thus, the current study examined the influence of asset tangibility, firm size, growth opportunities and profitability on leverage. Further, operating cash flows moderating effect on the influence of firm financial characteristics was examined. It was found that operating cash flows have a significant moderating effect on the influence of firm financial characteristics on the financial leverage of construction and allied companies listed in Nairobi Securities exchanges.

Keywords: Asset Tangibility, Profitability, Growth Opportunities, Firm Size, Operating Cashflows, Leverage.

REFERENCES

  • Abdullah, N., Parvez, K., Karim, T., & Tooheen, B. (2015).  The impact of financial leverage and market size on stock returns on the Dhaka Stock Exchange: Evidence from selected stocks in the manufacturing sector. International Journal of Economics, Finance and Management Sciences, 3(1): 10-15.
  • Acheampong, P., Agalega, E., & Shibu, K. (2014). The effect of financial leverage and market size on stock returns on the Ghana Stock Exchange: Evidence from selected Stocks in the manufacturing sector. International Journal of Financial Research, 5(1): 125-134.
  • Addae, A., Nyarko-Baasi, M., & Hughes, D. (2013). The effects of capital structure on profitability of listed firms in Ghana. European Journal of Business and Management, 5(31): 215-229.
  • Badar, R., & Saeed, A.  (2013). Impact of capital structure on performance empirical evidence from sugar sector of Pakistan. European Journal of Business and Management, 5(5): 78-86.
  • Baloch, B., Ihsan, A., & Kakakhel, J. (2013) Impact of firm size, asset tangibility and retained earnings on financial leverage: evidence from auto sector, Pakistan. Abasyn Journal of Social Sciences, 8(1): 143-155.
  • Bereźnicka, J. K. (2013). How does asset structure correlate with capital structure? Cross-industry and cross-size analysis of the EU countries. Universal Journal of Accounting and Finance, 1(1): 19-28.
  • Chesang, D., & Ayuma, O. (2016). Effect of financial leverage on profitability of listed agricultural firms at the Nairobi Securities Exchange. International Journal of Economics, Commerce and Management, 4(12): 445-493.
  • Gathogo, G., & Ragui, M. (2014). Capital Structure of Kenyan Firms: What determines it? Research Journal of Finance and Accounting, 5(5): 118-125.
  • Githira, C. W., & Nasieku, T. (2015). Capital structure determinants among companies quoted in Securities Exchange in East Africa. International Journal of Education and Research, 3(5), 483-496.
  • Greene, W. H. (2008). The econometric approach to efficiency analysis. The measurement of productive efficiency and productivity growth, Retrieved from http://citeseerx.ist.psu.edu.
  • Gujarati, D. (2003). Basic econometrics (4th Ed.). New York: McGraw Hill.
  • Hong, Z., Shuting, Y., & Meng, Z. (2012). Relationship between free cash flow and financial performance evidence from the listed real estate Companies in China. International Conference on Innovation and Information Management. Retrieved from http://www.ipcsit.com.
  • Hussain, M., Shahid, H., & Amkal, M.  (2016). Effect of profitability and financial leverage on capital structure in Pakistan textile firms. Industrial Engineering Letters, 6(3): 124-129.
  • Hussan, J. (2016). Impact of leverage on risk of the companies. Journal of Civil Legal Sciences, 5(4):17-22.
  • Luigi, P., & Sorin, V. (2009). A Review of the capital structure theories. Annals of Faculty of Economics, 3(1): 315–320.
  • Mahnazmahdavi, M., Mokhtarbaseri, M., Zare, A.  & Zare, H. (2013). The effect of sales growth on the determinants of capital structure of listed companies in Tehran Stock Exchange. Australian Journal of Basic and Applied Sciences, 7(2): 306-311.
  • Mostafa, H. T., & Boregowda, S. (2014). A brief review of capital structure theories. Research Journal of Recent Sciences, 3(10):113–118.
  • Mwangi, J. M. (2016). Effect of financial structure on financial performance of firms listed at East Africa Securities Exchanges, PHD Thesis. Jomo Kenyatta University of Agriculture and Technology.
  • Mwangi, L. W., Makau, M. S., & Kosimbei, G. (2014). Relationship between capital structure and performance of non-financial companies listed in the Nairobi Securities Exchange, Kenya. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics, 1(2):72-90.
  • Mwangi, M., & Birundu, E. M. (2015). The effect of capital structure on the financial performance of small and medium enterprises in Thika Sub-County, Kenya, International Journal of Humanities and Social Science, 5(1),151-156.
  • Myers S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics,13(2),187-221.
  • Olakunle, K., & Oni, M., (2014). Assessing the impact of asset tangibility on capital structure: choice for listed firms in Nigeria. Journal of Applied Economics and Business, 2 (3):5-20.
  • Tai, L. M. (2017). Impact of the financial markets’ development on capital structure of firms listed on Ho Chi Minh Stock Exchange. International Journal of Economics and Financial Issues, 7(3): 510-515.
  • Tarus, T. K., Chenous, N., & Biwott, G. (2014). Do profitability, firm size and liquidity affect capital structure? evidence from Kenyan listed firms. European Journal of Business and Management, 6(28): 119-124.
  • Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.