INVESTIGATING THE INFLUENCE OF FIRM CHARACTERISTICS ON FINANCING OF MICROFINANCE INSTITUTIONS IN KENYA

Citation:
Kaijage ES, Nzioka OM. "INVESTIGATING THE INFLUENCE OF FIRM CHARACTERISTICS ON FINANCING OF MICROFINANCE INSTITUTIONS IN KENYA.". In: THE 14TH INTERNATIONAL CONFERENCE ON AFRICAN BUSINESS AND SMALL BUSINESS (ICAESB). Dar es Salaam, Tanzania; 2014.

Date Presented:

May 2014

Abstract:

This paper investigates whether firm characteristics have an influence on financing of SMEs in Kenya using a sample of 12 Microfinance firms. Primary and secondary data were collected and subjected to multiple regression and correlation analysis in order to achieve the study objectives. The independent variables of the study are firm characteristics, which include; size measured by total assets, profitability measured by ROA and ROE, then risk, while the dependent variable is the total debt of the firm divided by the Equity and the ratio of capital to total assets. Results of this study suggest that, a strong negative association between return on equity and total assets has an equally strong negative effect/influence on the debt equity ratio. This implies that, the two variables have a strong negative effect on the financing of Micro Finance institutions. Overall, the implications of the findings of this study support both the trade-off theory and the pecking order theory of capital structure.

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