The Effect of Equity Financing on Financial Efficacy of Listed Manufacturing Companies in Kenya

Abstract: The objective of the study was to establish the effect of equity financing on financial efficacy of listed manufacturing companies in Kenya listed in Nairobi securities exchange over a period of seven (7) years (2011 – 2017).  The study was based on Modigliani and Miller Proposition I and II, the trade-off theory, pecking order theory and the agency theory. The research adopted a descriptive research design. The target population for the study were staff members of the listed manufacturing firms in Kenya. The target constituted respondents from, accounting department, finance department, Auditing and Assurance Department and Monitoring and Evaluation Department of listed manufacturing firms in Nairobi securities exchange in Kenya. A sample of 106 respondents were selected by use of stratified random sampling. Data was collected through a structured questionnaire. Both descriptive and inferential statistics were used to analyze the data. Data presentation was done by the use of charts and tables for ease of understanding and interpretation. Pilot study was conducted by the researcher taking some questionnaires to the listed manufacturing firms head offices in Kenya. The study used Cronbach (Alpha – α) model to test the internal consistency with the alpha coefficient of above 0.7 being considered reliable. To establish the validity of the research instrument the research pursued the opinions of experts in the survey of study especially the researcher’s supervisors. Quantitative and qualitative data that were collected using questionnaires and the questionnaires were inspected for errors and gaps before issuing to the respondents. The findings revealed that equity financing positively and significantly influenced financial efficacy among the listed manufacturing firms.