THE EFFECT OF LONG-TERM DEBT FINANCING ON PROFITABILITY OF COMMERCIAL AIRLINES IN KENYA

Abstract

The objective of this study was to assess the effect of long-term debt financing on the profitability of commercial airlines in Kenya. Pecking order theory directed the study. A cross-sectional research design was adopted in the study. The census sampling technique was. Secondary data was collected from audited financial statements. Panel data was analyzed using descriptive and inferential statistics. Descriptive statistics consisted of minimum values, maximum values, mean and standard deviation and inferential statistics consisted of correlational analysis, Hausman test for fixed and random effects and random effects models. Hausman test indicated that the random effect model was appropriate for the study. The study results showed that long-term debt financing has a negative and statistically significant effect on the profitability of commercial airlines in Kenya. This is supported by a regression coefficient of –0.2318 and a p-value of 0.038. The study recommends that executives of commercial airlines should aim to have a long-term debt that is manageable by the company and ensure that the long-term debt load is compatible with a favorable long-term debt ratio for the company to function without worrying about defaulting on loans. JEL: R40; L20; G20 Article visualizations: