n African Finance Journal - Capital structure, profitability and firm value : panel evidence of listed firms in Kenya




We investigate the relationship between leverage and the financial performance of listed firms in Kenya. We find strong evidence that leverage significantly, and negatively, affects firm profitability but does not affect firm value. Our results are robust to alternative panel specifications and firm size. Our results also suggest that asset tangibility, sales growth and firm size are important determinants of profitability. Surprisingly, asset tangibility consistently has a negative relationship with profitability. For small firms, we find that sales growth and firm size are important factors driving value. Yet, the same variables do not drive the value of large firms.


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