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Determinants of Cost of Capital: Kenyan context

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  • KENGERE, GEORGE ONYIEGO
  • Njagi, Manasseh Mwai
  • Kamau, Charles Guandaru

    (Technical University of Mombasa)

  • Chonga, Luvuno

Abstract

The purpose of this paper was to look at the determinants of the cost of capital for a firm. The study conducted a literature review with the goal of identifying the factors that influence the cost of capital for a firm. The research showed that profitability, liquidity, tax, growth, size, and age of the company are among the major determinants that influence the cost of capital for a firm. Further the research showed a positive correlation between the cost of capital and profitability, liquidity, growth, size, and age of the company. The capital arrangement of a firm is determined on account of the pecking order theory and trade-off theory while bearing in mind the cost elements associated with it. In Kenya, economic stability and political stability are the primary determinants that determine the cost of capital for a firm. This determining factor influences the availability and cost of credit offered by financial institutions in Kenya.

Suggested Citation

  • KENGERE, GEORGE ONYIEGO & Njagi, Manasseh Mwai & Kamau, Charles Guandaru & Chonga, Luvuno, 2023. "Determinants of Cost of Capital: Kenyan context," AfricArxiv ym896, Center for Open Science.
    • Handle: RePEc:osf:africa:ym896
    DOI: 10.31219/osf.io/ym896
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    References listed on IDEAS

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    1. Sufian Radwan Almanaseer, 2019. "Determinants of Capital Structure: Evidence from Jordan," Accounting and Finance Research, Sciedu Press, vol. 8(4), pages 186-186, November.
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