LONG TERM DEBT FINANCING AS A DETERMINANT OF FIRM PERFORMANCE: A SURVEY OF SELECTED SUGAR MANUFACTURING FIRMS IN KENYA.

Abstract

The main purpose of this study was to analyze Long term debt financing as a determinant of the performance of sugar manufacturing firms in Kenya. The study was guided by the three long term debt financing constructs namely: Corporate bond financing on firm performance, Long term loan financing on firm performance, Operating lease financing on firm performance. The tradeoff theory was used to inform the study. The study adopted a longitudinal research design and a targeted population of 9 and a sample size of 3. Simple random sampling was used to select the respondents. Inferential techniques were utilized in data analysis. Multiple linear Regressions model was used to identify significant predictors of Return on Assets controlling for confounders. Corporate bond financing, long term loan financing and operating lease financing did not have a significant relationship with Return on Equity. Results indicated that: Corporate bond financing and firm performance, (β =1.240, p< 0. 001), Long term loan financing and firm performance, (β =-20.991, p<.004), Operating lease financing and firm performance, (β =13.619, p<.020). The study concluded the following, Corporate bond financing significantly positively affects firm performance, Long term loan financing significantly negatively affects firm performance and operating lease financing does not significantly affect firm performance. The study recommended that, Sugar firms should become less dependent on long term loan financing in their capital structure. There is need for sugar firms to invest more in issuance of corporate bonds. Sugar firms should opt for outright purchase rather than excessive use of operating lease financing. The study contributed to literature review, policy and development of measurements of scale. The study suggests that other studies are needed to explore the effects of long term debt financing on performance of sugar firms in Kenya using predictors of firm performance other than long term loan financing and corporate bond financing.