Abstract: The main objective of the study was to determine the influence of earnings on capital structure of private manufacturing firms in Kenya The measure of earnings for this research is earnings before tax. Ascertaining and attaining an optimal capital structure for many firms is not an easy task. In Kenya many manufacturing firms are struggling to operate while others have been compelled to shut down. This study used descriptive survey design on a population of 853 firms as per KAM members’ directory of 2015. Using simple random sampling a sample of 208 CFOs of private manufacturing firms were selected from a target population of 455 CFOs of firms situated in Nairobi and its surrounding areas. The researcher collected primary data using self-administered questionnaire to obtain financial measures from the chief finance officers (CFOs) of these firms and secondary data was collected through a data survey sheet and document review form. Data was analyzed using Statistical Package for Social Sciences (SPSS) version 22. Descriptive and inferential statistics were employed. Under descriptive statistics percentages of responses and means of items was computed. In quantitative analysis Karl Pearson’s correlation, multiple linear regression, ANOVA and E -Views were used. The study concluded that high earnings cause increase in debt. In addition, firms raise capital first from earnings then debt. Most firms also prefer internal finance first before considering external finance.
Keywords: Earnings, Capital Structure, Earnings Before Tax.
Title: Influence of Earnings on Capital Structure of Private Manufacturing Firms in Kenya
Author: Abraham Malenya, Dr. Tobias Olweny, Dr. Mbithi Mutua, Dr. Clive Mukanzi
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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