Andrew Shitanda Nyongesa, Margaret Atieno


Capital structure decisions ensure that supermarket managers stipulate optimum capital structure for the organization. Despite the implementation of capital structure decisions, poor financial performance has plagued most of large-scale retailers for the past 20 years, forcing some to close some of its outlets. Uchumi supermarket, Tuskys supermarkets among other supermarkets have been making heavy losses leading to the closure of some of their branches. Uchumi has closed 3 5(95%) branches, Tuskys 61(95.3%) branches, and Choppies 13(87%) branches. According to an external audit report in 2020, Nakumatt owed creditors Ksh.38 billion yet the company gave over Ksh. 1 billion as interest-free soft loans to its directors. The objective of this study is to assess the effect of capital structure decisions on the profitability of large-scale retail supermarkets in Kenya. The study was anchored on the pecking order theory. The study employed a cross-sectional research design. A census sampling technique was employed where all the selected supermarkets were considered. Secondary data was collected from audited financial statements. Panel data was analyzed using descriptive and inferential statistics. Descriptive statistics comprised of minimum values, maximum values, mean and standard deviation and inferential statistics consisted of correlational analysis and random effects models. The study findings indicated that capital structure decisions have a negative and statistically significant effect on the profitability of large-scale retail supermarkets in Kenya. This is supported by a regression coefficient of –0.3479 and a p-value of 0.000. The study suggested that the management of retail stores should balance between debt and equity financing to ensure an optimum capital structure that maximizes profitability.


JEL: O10; O12; L81


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capital structure; profitability; large-scale retail supermarkets

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