CAPITAL STRUCTURE DETERMINANTS AMONG COMPANIES QUOTED IN SECURITIES EXCHANGE IN EAST AFRICA

Abstract

Capital structure decision plays an important role in shareholder’s wealth maximisation. Poor capital structure decision will result to high overall cost of capital and consequently low capital projects net present values. Based on the need to have firm’s optimal capital structure the currents study sought to find the determinants of capital structure among quoted firms in East Africa securities exchange. Specifically, the study aimed; to find out the relationship between profitability and capital structure, to establish the relationship between growth and capital structure, to find out the relationship between firm growth and capital structure, to establish the relationship between firm size and capital structure, to find out the relationship between asset structure and optimal capital structure and to determine the relationship between cost of capital and capital structure. A panel data set of 65 companies which were listed and actively trading over the 2009-2013 period of analysis was analysed using panel data and descriptive analysis. The analysis showed a positive insignificant relationship between profitability, growth, firm size and capital structure and significant positive relationship with asset structure. Further, there was a negative insignificant relationship between cost of capital and capital structure.

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