Abstract: This study sought to investigate the effect of capital structure formation on investment performance of the general insurance companies in Kenya. The study was anchored on the pecking order, trade-off and agency cost theories. Firm size tested the moderation effect in the relationship. The descriptive research design was employed whereas the panel regressions and correlation analysis tested the relationships strength and direction in the study models. The study target population comprised of seventy-two insurance companies. The sample consisted of thirty-nine general insurance companies purposively sampled. Secondary data was collected using customised schedules. The study revealed that long-term debt had a significant positive effect on return on assets whereas it showed a significant negative relationship with return on equity. The total debt had a significant negative relationship with the return on assets and equity. The total equity had a significant negative relationship with the return on equity. The firm size had a positive moderating effect on the return on assets and equity. The study recommended the use of long term debt to achieve improved investment performance. Further studies focusing on life and composite insurance companies can use longer period panel data on short term debt and staff productivity to facilitate comparisons.
Keywords: Capital Structure Formation, Long-term debt, Total Debt, Total Equity, Firm Size and Investment Performance.
Title: CAPITAL STRUCTURE FORMATION AND INVESTMENT PERFORMANCE OF THE GENERAL INSURANCE COMPANIES IN KENYA
Author: KARAKACHA TOLOI MOSES, FREDRICK W.S. NDEDE
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Research Publish Journals
