INFLUENCE OF CAPITAL STRUCTURE ON PROFITABILITY OF GOVERNMENT BASED DEPOSIT TAKING SAVINGS AND CREDIT CO-OPERATIVES IN KENYA

Denis Brian Gichuru, James N. Kung’u, Thomas W. Gakobo

Abstract


This study paper examines the influence of capital structure on the profitability of government based deposit taking savings and credit co-operatives in Kenya. The data used in the study was collected from the Annual Report and Financial Statements of nineteen (19) out of twenty nine (29) licensed government based Saccos covering a five (5) year period between 2013 and 2017. Thus a data set comprising of ninety five (95) observations was derived from the data collection exercise. Measure of Sacco profitability was through the use of the Return on Assets whereas capital structure was proxied through the debt to equity ratio and the debt to assets ratio. A descriptive research design was used in testing the hypotheses. Results of this study indicated that that capital structure as proxied using the Debt/ Equity Ratio and the Debt/Assets Ratio had a negative insignificant effect on profitability of Saccos measured using the ROA. The study recommended that that Deposit Taking Saccos’ Board and Managements should endeavour to maintain an appropriate mix of equity and debt that maximize Sacco membership return and wealth.

 

JEL: G21, E51

 

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capital structure, return on assets, debt to equity ratio, debt to assets ratio

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References


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DOI: http://dx.doi.org/10.46827/ejefr.v0i0.642

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