Testing the trade-off theory and the pecking order theory of capital structure in Kenya's listed firms
Date
2018
Authors
Karani, Silingl Linda
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The static trade-off and pecking order models are tested on a sample data of 19 Kenyan firms listed on the Nairobi stock exchange for the period 2006-2016. Empirical results prove that both models can explain some part of the capital structure. The static trade-off model shows that firm leverage is affected by several determinants, and the pecking order model displays similar movements between the change of long-term debt and financial deficit. However, both models have short comings. The static trade-off model fails to explain the differences across sectors and the pecking order model fails to explain the low deficit coefficient.
Description
A Research project Submitted in partial fulfillment of the requirements for the degree of Bachelor of Business Science in Financial Economics at Strathmore University
Keywords
Capital structures, pecking order theory, state trade-off theory