Capital structure decisions should be directed towards maximization of the value of the firm and where those decisions are inappropriate the financial performance of sugar firms shall remain in jeopardy not just in western Kenya but across nations. The purpose of this study was to determine the effect of capital structure decisions on financial performance of sugar firms in Western Kenya. Specifically this study sought to determine the effect of debenture financing on financial performance. The research was anchored on Trade-Off and Pecking order Theories. The study used descriptive study design with both primary and secondary data sources, where 109 questionnaires were administered to different employees of sugar firms. The quantitative data were analyzed through descriptive statistics as well as Pearson correlation and linear regression analysis. The study found that debenture financing influenced positively and significantly the financial performance of the sugar firms in western Kenya, statistically significant. The constructs and attributes regarding debenture financing were evaluated by respondents on a 5-point Likert scale and results revealed that security for debentures financing is required from a sugar company. The results further revealed that financing using debentures of floating charge and title deed positively influenced performance of sugar firms.