Effects of Capital Structure on Financial Performance of Banks Listed at the Nairobi Securities Exch

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This research was carried out to explore the effect of capital structure on financial performance of banks listed at the Nairobi Securities Exchange(NSE).The variables under investigation include;debt,equity,reserves,earnings and share capital.The study objectives were:to determine the influence of debt on financial performance of commercial banks listed in NSE;to examine the influence of equity on financial performance ofcommercial banks listed in NSE;to assess the influence ofshare capital on financial performance of commercial banks listed in NSE;to establish the influence of reserves on financial performance of commercial banks listed in NSE;and to find out the influence of earnings on financial performance of commercial banks listed in NSE.The study was supported by three theories that is Modigliani and Miller Model,Pecking Order Theory and Trade-off Theory.The study used descriptive research design because,it is concerned in describing the state of the phenomena or elements as they are and is mainly designed or formalized on substantial structure that is research objectives are sought by the study.The population of the study involved the quoted commercial banks in NSE.The data were collected from the published bank financial statements and NSE historical data for a period of ten years that is from2008to2017.A statistically significant relationship was found between commercial banksfinancial performance and debt.There was no statistically significant relationship between commercial banks’financial performance and equity.There was a statistically significant relationship between commercial banks’financial performance and share capital.A statistically significant relationship was found between commercial banks’financial performance and earnings.On the other hand,there was no significant relationship found between financial performance and reserves.
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