Capital Structure and Firm Value of Non-Financial Firms Listed at the Nairobi Securities Exchange

Abstract

This study sought to provide evidence on the relationship between capital structure and firm's value. The study was drawn secondary data from 36 companies quoted on the Nairobi Securities Exchange (NSE) for the year ended 31st December 2011 to 2015. The results above indicate there was a statistically significant relationship between the capital structure and value of nonfinancial firms listed on the Nairobi Securities Exchange.  The study recommended that Firms are strongly advised always to compare the marginal benefit of using long-term debt to the marginal costs of long-term debt before concluding on using it in financing their operations. This recommendation came as a result as shown by the study. Long-term debt impacts positively on firm's value just like equity capital.

Keywords: Capital structure, firm value, Agency Cost, Weighted Least Squares