Capital Structure, Ownership Structure and Firm Value: An Econometric Panel Analysis of Firms Listed in Kenya

Abstract

The purpose of this study is to explore the effect of capital structure and ownership structure on market value of listed firms in Kenya. In this study, data of companies that were active in Nairobi Securities Exchange (NSE) between the years 2007 to 2012 is used. Capital structure is surrogated by total long term debt to total capital ratio, while ownership structure is represented by summation of amount of ownership of five greatest shareholders of a company relative to the total shareholding and firm value is proxied by Tobin's Q. Before empirical estimations, data was subjected to the Levin-Lin-Chu panel unit root test. The results indicated that all variables were integrated of order zero (p=. 000), that is, are stationary at levels. Panel correlation and multiple regression methods were used in the empirical analysis. Results indicate that capital structure ratio significantly negatively …