Abstract:
This study examined the relationship between ownership structure and leverage of firms listed in the Nairobi Securities Exchange (NSE). The objectives of the study were: to evaluate the relationship between state ownership and leverage, to determine the relationship between private ownership and leverage, to determine the relationship between foreign ownership and leverage and to evaluate the relationship between institutional ownership and leverage. The study adopted a correlational research design. The target population of the study comprised of all the 61 firms which have been listed in the NSE as at December 2014. The study adopted purposive sampling technique which was conducted among the 44 firms that have been consistently listed for a period of 9 years from 2006 to 2014. Data for this study was collected from annual published financial statements. Both descriptive and inferential analysis was conducted where Correlation and regression analysis was applied to test the relationship between ownership structure and leverage. Regression was conducted to test the effect of the various independent variables pooled together on the dependent variable. Two tail t-test and ANOVA test was used to determine the degree of significance of the relationship. The data analyzed was presented in form of tables. The results of the study showed that there is no statistical significant relationship between private ownership and debt ratio, debt to equity ratio and debt to total assets ratio where P=0.414, P=0.407 and P=0.405 respectively. Additionally, there was no statistical significant relationship between foreign ownership and debt ratio, debt to equity ratio and debt to total assets ratio where P=0.203, P=0.279 and P=0.280 respectively. The findings of the study revealed that there was no statistical significant relationship between institutional ownership and debt ratio, debt to equity ratio and debt to total assets ratio where P=0.478, P=0.443 and P=0.449 respectively. Finally the findings of the study revealed that there is a weak positive relationship between ownership structure and leverage (R=0.475) with a significance value of 0.807. Therefore this study concludes that there is no statistical significant relationship between ownership structure and leverage of firms listed in the Nairobi Securities Exchange.
