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An Empirical Analysis of Macro-Economic Influences on Corporate Capital Structure of Listed Companies in Kenya

Author

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  • Charles Muthama
  • Peter Mbaluka
  • Elizabeth Kalunda

Abstract

Capital structure is an important aspect of financial management however the influence of macroeconomic factors in the determination of capital structure is to some extent under-researched. This article analyzes the influence of the macro economic factors on the capital structure of selected listed companies in Kenya. The article through analytical and descriptive research design aimed at determining the magnitude and the direction of the relationship between selected macroeconomic variables on corporate capital structure of listed companies in Kenya. An econometric model of multiple linear regressions was used where leverage (debt ratios) was regressed against GDP growth rate, inflation and interest rate. The study revealed that indeed macro economic factors have pronounced influence on the capital structure of the listed companies. GDP growth rate was found to have a positive influence on long term debt ratio and a negative influence on total debt ratio and short term debt ratio. Inflation on the other hand had a negative influence on the short term debts while interest rates as measured by the treasury bills have a positive influence on the long term debt ratio and total debt ratio and a negative influence on the short term debt ratio.

Suggested Citation

  • Charles Muthama & Peter Mbaluka & Elizabeth Kalunda, 2013. "An Empirical Analysis of Macro-Economic Influences on Corporate Capital Structure of Listed Companies in Kenya," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 2(2), pages 1-3.
    • Handle: RePEc:spt:fininv:v:2:y:2013:i:2:f:2_2_3
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    Citations

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    Cited by:

    1. Rana El Bahsh & Ali Alattar & Aziz N. Yusuf, 2018. "Firm, Industry and Country Level Determinants of Capital Structure: Evidence from Jordan," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 175-190.
    2. Chow, Yee Peng & Muhammad, Junaina & Bany-Ariffin, A.N. & Cheng, Fan Fah, 2019. "Macroeconomic Uncertainty and Corporate Capital Structure: Evidence from the Asia Pacific Region," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(2), pages 99-122.
    3. Sakshi Khanna & Amit Srivastava & Yajulu Medury, 2015. "The Effect of Macroeconomic Variables on the Capital Structure Decisions of Indian Firms: A Vector Error Correction Model/Vector Autoregressive Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 5(4), pages 968-978.
    4. Raja Zekri Ben Hamouda & Nessrine Hamzaoui & Faouzi Jilani, 2023. "Capital Structure Determinants: New Evidence from the MENA Region Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 144-163, January.
    5. Endri Endri & M. Iqbal Rasyid Supeni & Yanti Budiasih & Matdio Siahaan & A. Razak & Sudjono Sudjono, 2021. "Oil Price and Leverage for Mining Sector Companies in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 24-30.
    6. Quoc Trung Nguyen Kim, 2023. "Does COVID-19 affect small and medium enterprises’ capital structure in vietnam?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2190268-219, December.
    7. Ingrid-Mihaela Dragota & Aura-Cristina Stefan-Dobrin, 2016. "An Empirical Investigation of the Firm- and Country- Specific Debt Determinants in Four Nordic Countries," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 8(2), pages 061-075, December.
    8. Andreas Kaloudis & Dimitrios Tsolis, 2018. "Capital Structure and Speed of Adjustment in U.S. Firms. A Comparative Study in Microeconomic and Macroeconomic Conditions - A Quantille Regression Approach," Papers 1811.04473, arXiv.org.

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