A significant number of the non-financial firms listed at the Nairobi Securities Exchange (NSE) have been experiencing declining financial performance and financial growth, which deter investors from investing in such firms. Hence, the study aimed at establishing the effect of financial structure on the financial growth of non-financial firms listed at the NSE. The study was guided by the Modigliani-Miller theory, Agency Theory, Pecking Order Theory, Trade-off Theory, Market Timing Theory, and Theory of Growth of the Firm. An explanatory research design was adopted. The study’s target population comprised 45 non-financial firms listed at the NSE for a period of ten years, from 2008 to 2017. The panel model revealed that short-term debt, long-term debt, retained earnings, and share capital explain 61.36% of variations in financial growth as measured by growth in earnings per share and 65.57% of variations in financial growth as measured by growth in market capitalization. Short-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.024095, p=0.013) and growth in market capitalization (β=0.028529, p=0.006). Long-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.864088, p=0.000) and growth in market capitalization (β=0.958656, p=0.000). Retained earnings have a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.951749, p=0.015) and growth in market capitalization (β=0.043784, p=0.004). Further, share capital has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.007016, p=0.000) and growth in market capitalization (β=0.09635, p=0.001). Firm size significantly intervenes in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in earnings per share. However, Firm size does not intervene in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in market capitalization. The study concludes that short-term debt, long-term debt, retained earnings, and share capital positively influence financial growth as measured by both growth in earnings per share and growth in market capitalization. The study recommends that the management of non-financial firms listed at the NSE to balance financing a firm using debt and equity. The study also recommends that the management of non-financial firms listed at NSE to encourage its shareholders to re-invest back their earnings rather than consuming them as dividends. Financial structure varies significantly depending on the sector in which a firm operates. There is a need to conduct a comparison study to establish the effect of financial structure on the financial growth of non-financial firms versus financial firms listed at the NSE. The comparison study will tell which form of financing is appropriate for non-financial firms and which one is appropriate for financial firms.
| Published in | Journal of Finance and Accounting (Volume 11, Issue 1) |
| DOI | 10.11648/j.jfa.20231101.12 |
| Page(s) | 12-25 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2023. Published by Science Publishing Group |
Financial Structure, Firm Size, Financial Growth, Non-Financial Firms, Nairobi Securities Exchange
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APA Style
David Haritone Shikumo, Oluoch Oluoch, Joshua Matanda Wepukhulu. (2023). Financial Structure, Firm Size and Financial Growth of Non-Financial Firms Listed at the Nairobi Securities Exchange. Journal of Finance and Accounting, 11(1), 12-25. https://doi.org/10.11648/j.jfa.20231101.12
ACS Style
David Haritone Shikumo; Oluoch Oluoch; Joshua Matanda Wepukhulu. Financial Structure, Firm Size and Financial Growth of Non-Financial Firms Listed at the Nairobi Securities Exchange. J. Finance Account. 2023, 11(1), 12-25. doi: 10.11648/j.jfa.20231101.12
AMA Style
David Haritone Shikumo, Oluoch Oluoch, Joshua Matanda Wepukhulu. Financial Structure, Firm Size and Financial Growth of Non-Financial Firms Listed at the Nairobi Securities Exchange. J Finance Account. 2023;11(1):12-25. doi: 10.11648/j.jfa.20231101.12
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author = {David Haritone Shikumo and Oluoch Oluoch and Joshua Matanda Wepukhulu},
title = {Financial Structure, Firm Size and Financial Growth of Non-Financial Firms Listed at the Nairobi Securities Exchange},
journal = {Journal of Finance and Accounting},
volume = {11},
number = {1},
pages = {12-25},
doi = {10.11648/j.jfa.20231101.12},
url = {https://doi.org/10.11648/j.jfa.20231101.12},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20231101.12},
abstract = {A significant number of the non-financial firms listed at the Nairobi Securities Exchange (NSE) have been experiencing declining financial performance and financial growth, which deter investors from investing in such firms. Hence, the study aimed at establishing the effect of financial structure on the financial growth of non-financial firms listed at the NSE. The study was guided by the Modigliani-Miller theory, Agency Theory, Pecking Order Theory, Trade-off Theory, Market Timing Theory, and Theory of Growth of the Firm. An explanatory research design was adopted. The study’s target population comprised 45 non-financial firms listed at the NSE for a period of ten years, from 2008 to 2017. The panel model revealed that short-term debt, long-term debt, retained earnings, and share capital explain 61.36% of variations in financial growth as measured by growth in earnings per share and 65.57% of variations in financial growth as measured by growth in market capitalization. Short-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.024095, p=0.013) and growth in market capitalization (β=0.028529, p=0.006). Long-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.864088, p=0.000) and growth in market capitalization (β=0.958656, p=0.000). Retained earnings have a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.951749, p=0.015) and growth in market capitalization (β=0.043784, p=0.004). Further, share capital has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.007016, p=0.000) and growth in market capitalization (β=0.09635, p=0.001). Firm size significantly intervenes in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in earnings per share. However, Firm size does not intervene in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in market capitalization. The study concludes that short-term debt, long-term debt, retained earnings, and share capital positively influence financial growth as measured by both growth in earnings per share and growth in market capitalization. The study recommends that the management of non-financial firms listed at the NSE to balance financing a firm using debt and equity. The study also recommends that the management of non-financial firms listed at NSE to encourage its shareholders to re-invest back their earnings rather than consuming them as dividends. Financial structure varies significantly depending on the sector in which a firm operates. There is a need to conduct a comparison study to establish the effect of financial structure on the financial growth of non-financial firms versus financial firms listed at the NSE. The comparison study will tell which form of financing is appropriate for non-financial firms and which one is appropriate for financial firms.},
year = {2023}
}
TY - JOUR T1 - Financial Structure, Firm Size and Financial Growth of Non-Financial Firms Listed at the Nairobi Securities Exchange AU - David Haritone Shikumo AU - Oluoch Oluoch AU - Joshua Matanda Wepukhulu Y1 - 2023/01/30 PY - 2023 N1 - https://doi.org/10.11648/j.jfa.20231101.12 DO - 10.11648/j.jfa.20231101.12 T2 - Journal of Finance and Accounting JF - Journal of Finance and Accounting JO - Journal of Finance and Accounting SP - 12 EP - 25 PB - Science Publishing Group SN - 2330-7323 UR - https://doi.org/10.11648/j.jfa.20231101.12 AB - A significant number of the non-financial firms listed at the Nairobi Securities Exchange (NSE) have been experiencing declining financial performance and financial growth, which deter investors from investing in such firms. Hence, the study aimed at establishing the effect of financial structure on the financial growth of non-financial firms listed at the NSE. The study was guided by the Modigliani-Miller theory, Agency Theory, Pecking Order Theory, Trade-off Theory, Market Timing Theory, and Theory of Growth of the Firm. An explanatory research design was adopted. The study’s target population comprised 45 non-financial firms listed at the NSE for a period of ten years, from 2008 to 2017. The panel model revealed that short-term debt, long-term debt, retained earnings, and share capital explain 61.36% of variations in financial growth as measured by growth in earnings per share and 65.57% of variations in financial growth as measured by growth in market capitalization. Short-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.024095, p=0.013) and growth in market capitalization (β=0.028529, p=0.006). Long-term debt has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.864088, p=0.000) and growth in market capitalization (β=0.958656, p=0.000). Retained earnings have a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.951749, p=0.015) and growth in market capitalization (β=0.043784, p=0.004). Further, share capital has a positive and significant effect on financial growth as measured by growth in earnings per share (β=0.007016, p=0.000) and growth in market capitalization (β=0.09635, p=0.001). Firm size significantly intervenes in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in earnings per share. However, Firm size does not intervene in the effect of financial structure on the financial growth of non-financial firms listed at the NSE measured using growth in market capitalization. The study concludes that short-term debt, long-term debt, retained earnings, and share capital positively influence financial growth as measured by both growth in earnings per share and growth in market capitalization. The study recommends that the management of non-financial firms listed at the NSE to balance financing a firm using debt and equity. The study also recommends that the management of non-financial firms listed at NSE to encourage its shareholders to re-invest back their earnings rather than consuming them as dividends. Financial structure varies significantly depending on the sector in which a firm operates. There is a need to conduct a comparison study to establish the effect of financial structure on the financial growth of non-financial firms versus financial firms listed at the NSE. The comparison study will tell which form of financing is appropriate for non-financial firms and which one is appropriate for financial firms. VL - 11 IS - 1 ER -
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