Abstract: Leverage is the inclusion of debt in a company’s capital structure. The purpose of leverage is to finance viable business ventures in a company with a promise to pay the debt providers the principal and interest when they fall due in exchange for their cash now. Debt financing needs a lot of consideration when it comes to agricultural firms because its repayment is determined by the dynamics facing the agricultural sector .This study sought to examine the financial factors that influence the leverage of agricultural firms listed in the Nairobi securities exchange. Specifically the study established whether and the extent to which asset tangibility, profitability, retained earnings and firm size influence leverage in the agricultural firms listed on the NSE. The study used secondary data gathered from audited annual financial statements and reports from the Capital Market Authority resource centre. Financial statements for a period of 2012 to 2016 were used for this study. The study adopted a descriptive research. Financial ratio analysis, correlation analysis and finally multiple regression analysis was used. Multiple regression analysis revealed that the was no relationship between leverage and the four independent variables combined together asset tangibility, retention ratio, profitability and firm size, this is because the significance level was found to be 0.245, which was higher than the p-value of 0.05. The conclusion was that Leverage was not affected by the combined independent variables in question therefore the model was not a good fit and one of the recommendation was that further data should be collected to not only cover the listed agricultural firms in the NSE so that other researchers could have more data that might reveal significant correlation when analysed.
Keywords: Financial Factors, Leverage, Agricultural Firms Listed in the NSE.
Title: FINANCIAL FACTORS INFLUENCING FIRM LEVERAGE: A CASE OF AGRICULTURAL FIRMS LISTED IN THE NAIROBI SECURITIES EXCHANGE, KENYA
Author: LoiseMukami Mwangi, Dr.Yusuf Muchelule
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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