Effects of Capital Structure on Share Price Performance of Commercial Banks Listed in Nairobi Security Exchange, Eldoret, Kenya

Abstract

The study aimed at investigating the effects of capital structure on the share-price performance on banks Listed on the Nairobi Security Exchange. It was guided by the following objectives; to find out the effect of debt on share price performance in banks listed in the Nairobi Security Exchange, to establish the effects of equity on share price performance in banks listed in the Nairobi Security Exchange, to assess the effect of bonds on share price performance in the banks listed in the Nairobi Security Exchange and to find out the effects of retained earnings on share price performance in the banks listed in the NSE..The study employed a descriptive research design for those companies which have gone public from 2009-2015. The target population comprised of the eleven cross listed banks in Kenya Nairobi Security Exchange. The branch managers and operations managers were selected to participate in the study using purposive sampling. The study employed census sampling technique in order to come up with the 11 banks to be studied since it was only cross listed financial institutions required. The researcher used questionnaires to collect data. The data collected was analyzed using descriptive methods and inferential statistics. Analysis of Variance and correlation was used to indicate the impact of the trends hypothesized to influence the performance. The findings from the analysis were organized, summarized and presented using tables. The study findings indicated that there was a significant relationship between all the study variables, debt, equity, bond and retained earnings on share price performance, The study recommends that, the commercial banks listed in Nairobi Security Exchange should formulate and enact a policy which makes commercial debt cheaper hence reduces cost of operations of banks.