Faculty of Management Sciences

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The extent of debt financing within state-owned corporations in Kenya
(Virtus Interpress, 2015) Nyamita, Micah Odhiambo; Garbharran, Hari Lall; Dorasamy, Nirmala
The public sector reforms’ programme in Kenya, has witnessed five state-owned corporations being privatised, and several more, from hotels to banks, have been scheduled to be privatised. However, many of Kenya’s state-owned corporations are in considerable debt, which reduce their value in the process of privatisation. This study attempted to determine the extent and the theory suitable for explaining debt-financing within the state-owned corporations in Kenya from 2007 to 2011. The study applied both descriptive statistics and a hybrid of cross sectional and longitudinal quantitative surveys. The results observed some level of stability on the aggregate long-term debt ratios, with minimal use of stock market instruments, which implied the application of the agency theory.
Debt financing structure within the State-owned corporations in Kenya
(Virtus Interpress, 2015) Nyamita, Micah Odhiambo; Dorasamy, Nirmala; Garbharran, Hari Lall
The current public sector financial management reforms agenda within the state-owned corporations in Kenya aimed at integrating and aligning their performance to vision 2030, has not yet achieved the traction required. This study, therefore, examined the different types of debt financing strategies applied by the various state-owned corporations in Kenya, in comparison to those applied by state-owned corporations from developed and developing economies. The study specifically revealed that private debt financing, through bank loans and payables is commonly used amongst Kenyan state-owned corporations. While, most state-owned corporations from developed and developing economies, such as in America, Europe, Asia and South Africa, use public debt financing, through financial securities, traded in both domestic and international capital markets.
Factors influencing debt financing and its effects on financial performance of state corporations in Kenya
(2014) Nyamita, Micah Odhiambo; Garbharran, Hari Lall; Dorasamy, Nirmala
Identifying the best level of debt financing within corporations and its determinants is one of the main issues in financial management theory, as the use of debt is believed to have an important influence on the performance of corporations. The majority of studies on debt financing have been undertaken using data from developed economies, focusing more on private sector non-financial corporations. This study investigated the factors influencing debt financing and whether the use of debt positively or negatively influences the financial performance of state corporations in Kenya. The “financial leverage”, which is the proportion of debt financing of state corporations in the Kenyan region, based on the total debt and the total assets, was the object of analysis for the period 2007 to 2011. Applying both descriptive and inferential statistics, and a hybrid of cross sectional and longitudinal quantitative surveys, primary data from questionnaires, and secondary data from the corporations’ financial statements, were utilized. The sample size used was 50 income generating state corporations in Kenya. Using the primary and secondary data, the study, in addition, determined the extent of debt financing and analysed the different types of debt financing used by the various state corporations. It focused on the use of financial ratio analysis to identify the financial performance of the corporations by applying a pooling of cross-section analysis. Moreover, the “financial leverage” ratio was analysed in correlation with the financial performance ratios, in order to identify the potential of anticipation for future financing options for state corporations in Kenya. Further, the regression analysis result was used to demonstrate whether there is a relationship between the corporation’s “financial leverage” and its financial performance ratios and the debt financing theory suitable for explaining debt capital structure within the state corporations. The panel data for financial performance helped in identifying whether there was a significant relationship between “financial leverage” of corporations and their financial performance. The results identified the main factors influencing debt financing within state-owned corporations in Kenya to include profitability, asset tangibility and corporation growth. It was also determined that debt financing is inversely related to financial performance of state-owned corporations in Kenya. In addition, the results revealed that state-owned corporations from developed and developing economies use capital market debt securities, such as bonds and notes, and derivative financial instruments, such as swaps, options and forward contracts. In contrast, these types of debt are not common within the Kenyan state-owned corporations. The developed and developing economies state-owned corporations are perceived to have embraced the new public sector financial management reforms agenda and operate in more developed and efficient capital markets. However, in Kenya, the new public sector financial management agenda may have not been implemented positively within the state-owned corporations and the country’s capital market may still be efficient. It is expected that the findings of this study would have vital policy implications for Kenyan state-owned corporations, in particular, and the government, in general.
Factors influencing debt financing decisions of corporations – theoretical and empirical literature review
(Business Perspectives, 2014) Nyamita, Micah Odhiambo; Garbharran, Hari Lall; Dorasamy, Nirmala
Over the past half century, there has been an increasing interest on identifying the factors influencing debt financing within corporations. Based on available literature, both from developed and developing economies, this literature review paper examined the factors influencing debt financing decisions within corporations. Applying desktop research methodology, the paper used a three-thronged approach: theoretical, methodological and empirical. The theoretical approach reviewed the key theories proposed with respect to corporations’ debt financing decisions. The methodology approach helped in identifying the common applicable conceptual models and the empirical findings related to the factors affecting debt financing of corporations. The factors identified were both firm specific and macroeconomic factors, and the empirical findings showed either positive or negative relationship results.
Factors influencing debt financing within State-owned corporations in Kenya
(International Foundation for Research & Development, 2014-11) Nyamita, Micah Odhiambo; Garbharran, Hari Lall; Dorasamy, Nirmala
Debt financing is deemed crucial for economic development, as evidenced by the positive relationship between financial deepening and economic growth. Majority of studies on debt financing have been undertaken using data from developed economies, focusing more on private sector non-financial corporations. This study, therefore, attempts to fill the gap in the literature by investigating the factors influencing debt financing, using data from corporations within the public sector and from a developing economy. The study applied the fixed effects (FE), random effects (RE) and the general methods of moments (GMM), using the panel data regression analysis. Profitability, asset tangibility and corporation growth, were identified to be the main factors influencing debt financing within state-owned corporations in Kenya.

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