EFFECT OF DEBT FINANCING ON FINANCIAL PERFORMANCE OF SELECTED STATE CORPORATIONS IN KENYA

There was a recent interest of state corporations borrowing funds to manage their operations. This begged the question why debt financing was being opted for running state corporations. It was in this regard that this study examined the effect of debt financing on financial performance of selected state corporations in Kenya. The study was guided by the following specific objectives: To determine the effect of bonds on financial performance of selected state corporations, to assess the effect of debentures on financial performance of selected state corporations, to assess the effect of bank loans on financial performance of selected state corporations and to evaluate the effect of factoring on financial performance of selected state corporations. To underpin the study findings, information asymmetry and transaction cost theory was used. The study adopted descriptive survey study design and it had a target 206 state-owned corporations out of which a sample of 136 was drawn from using Yamane’s formulae. A structured questionnaire was used to collect information from finance and chief accountants of the selected state-owned corporations. Data analysis was done using SPSS version 26. The analysis indicated there is a strong positive relationship between debt financing and financial performance since. However, the study indicated that there is a medium positive relationship between bonds and financial performance. Further, the study showed that there was a very weak positive relationship between debentures and financial performance. It was clear that analysis indicated that there was a weak positive relationship between bank loans and financial performance. Lastly the study also showed that there was a very weak positive relationship between factoring and financial performance. Key Terms: Bank Loans, Bond, Debenture, Debt Financing, Factoring, Financial Performance CITATION : Mwazito, H. H., & Mwanzia, S. (2023). Effect of debt financing on financial performance of selected state corporations in Kenya. The Strategic Journal of Business & Change Management, 10 (4), 961 – 978. http://dx.doi.org/10.61426/sjbcm.v10i4.2799