Effect of Firm Size on Short Term Debt of Firms Listed on the Nairobi Securities Exchange, Kenya

Abstract

The capacity of a firm, the diversity and number of production capabilities, or the quantity and multiplicity of services a firm may simultaneously give to its consumers can all be considered as part of the firm's size. Short-term obligations should be used to fund short-term assets. The study evaluated the effect of firm size on short term debt on companies listed on Nairobi securities exchange. The study was anchored on agency theory and the growth firm theory. The study utilized descriptive research design. The study used secondary data from annual accounting report of quoted firms on Nairobi securities exchange. Data analysis was performed in order to convert obtained data into a format that can be used for interpretation and conclusion, therefore analysis was based on panel data, the analysis was based on panel regression. Result demonstrated a negative and significant effect between firm size and short term debt. The study recommends that management of firms’ especially larger firms should access long term financing which can be more long term investment which can enhance firms’ growth and competitiveness and smaller firms should not rely on short term debt.