| dc.description.abstract | Globally, the manufacturing industry is a crucial engine for sustaining economic growth and development. However, in Kenya, the sector’s contribution the economy has stagnated at 10% of the gross domestic product (GDP), contributing to an average of 10% from 1964-1973 and marginally increased to 13.6% from 1990-2007 and has been below 10% in recent years further dropping to 8.4% in 2017 and 7.1% in 2020. The renewed effort to revive the sector through the National Government Big 4 Agenda is expected to grow its contribution to GDP to 15% by 2022. Financing structure is imperative to optimize a company’s profitability and hence improve its competitiveness to realize the National Government Medium Term Development Agenda. Findings by previous researchers in the subject have not been conclusive. This study applied Dynamic Unbalanced Panel analysis techniques using Secondary data for 10-year period (2010 - 2019) with the study population comprising of 9 listed firms. A census of the firms was done and resulted to 86 observations. Focus was on debt, equity, retained earnings and asset tangibility moderated by economic growth rate and earnings volatility on performance which was proxied by Tobin’s Q and EVA. Four theories guided the study namely; Modigliani & Miller, trade – off, pecking order and agency theories. Longitudinal research design was used as it is appropriate when dealing with panel data. STATA version 15 was used for analysis. Model estimation followed a two Step System GMM testing the study hypotheses at 5 % significance level. Pearson correlation coefficient was used to show the strength and direction of association among the study variables. Short term debt financing was negatively and significantly correlated to Tobin Q; (r = -0.4790) and negatively correlated with LnEVA (r = -0.5032) giving negative and significant effect on performance as shown by the regression weights estimated by GMM. Long term debt ratio (LTDR) has a fairly moderate and positive correlation with Tobin Q (r = 0.4388). It is also strongly correlated with ln EVA (r = 0.6570). The regression coefficients were also positive and significant for both performance proxies. Equity financing had a negative correlation with Tobin Q (r = -0.2682). The regression weight being (β= -0.1674526; p = 0.002 < 0.005). On the other hand, EAR was found to have positive correlation with Ln EVA (r= 0.5218). The regression coefficient was positive but not significant (β = 0.2901601; p = 0.087 > 0.05) and hence concluding that it improved performance marginally. RR had a moderate positive correlation (r = 0.3197) with Tobin Q and a strong positive correlation (r = 0.5997) Ln EVA respectively. The regression coefficients were also positive and significant. ATNG was positively correlated with Tobin Q (r = 0.4331) and LnEVA (r = 0.3683). The regression weights were also positive and significant. The study therefore concluded that financing structure is imperative as it directly determines the financial burden firms face in their operations financing sources and concentrate on recovering cash flow quickly to minimize need for short term financing. Long term financing sources improve performance and need to be enhanced. Additionally, the government need to reduce the cost of borrowing. Equity require any payment of cash hence should be applied. Lastly, MAFs need to consider project financing to limit exposure to credit risk. Future studies can consider a balanced panel analysis and other panel data econometric techniques. | en_US |
