Debt Financing and Financial Performance: Evidence from Listed Non-Financial Firms in East Africa Community

The purpose of this study was to investigate the influence of debt financing on financial performance among East African Community-listed non-financial enterprises. To achieve this goal, secondary data was collected from four East African nations. Throughout the 2011–2020 study periods, the research employed an explanatory research design. The study operationalized debt financing by debt/assets ratio and debt/equity ratio. Financial performance was operationalized by return on assets (ROA) and earnings per share (EPS). Results showed that debt/assets proportion significantly influences financial performance in Kenya, Rwanda, Tanzania, and Uganda. It was also revealed that in Rwanda debt to assets influences earnings per share while it does not influence in Kenya, Tanzania, and Uganda. Thus, the hypothesis that there exists no substantial link amongst debt/asset ratio and financial performance among listed non-financial firms in the East Africa Community was rejected in terms of debt/assets ratio but supported in terms of earnings per share. The study's findings have expanded our understanding of previously uncharted territory. It validates theories of financial management that suggest concepts related to debt financing and financial performance. It is suggested that future study concentrate on non-East African Community nations. By doing so, it will be possible to ascertain whether the study's conclusions apply to other parts of Africa.