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Douglas Maroma Rosana - Doctoral candidate, School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya

Willy Mwangi Muturi - Ph.D., Associate Professor, School of Business and Entrepreneurship, Jomo-Kenyatta University of Agriculture and Technology (JKUAT), Kenya

Oluoch Oluoch - Ph.D., Senior Lecturer, School of Business and Entrepreneurship, Jomo-Kenyatta University of Agriculture and Technology (JKUAT), Kenya


As Kenya experiences economic growth and navigates shifts in global financial markets, public companies face challenges and opportunities related to their financial structures. The research investigated how changes in the long-term debt proportion of the financial structure impact the security returns of public companies in Kenya, as listed at the Nairobi Securities Exchange (NSE). The study was guided by the research philosophy of positivism given that it relied on quantitative data and espoused the scientific approach to research. It adopted a causal or explanatory research design to check how firm stock market value was impacted upon by the volatility in the debt structure over time. A census study of the 67 public companies was employed out of which 49 met data requirements. The study involved the use of secondary data collected from the companies' financial statements for the period of eleven years from January 2012 to December 2022. The data collected was analyzed using descriptive and inferential statistics. Test the hypothesis that long term debt volatility is value irrelevant was tested at 95% confidence interval using the t-statistic and p-value. The study adopted panel data to carry out the research analysis. Panel regression analysis using the random effects model was undertaken after appropriate normality, model specification, homoscedasticity, linearity and autocorrelation diagnostic tests. The findings indicate that there is the volatility of the portion of long term debt in the capital structures of firms at the NSE has a positive pricing effect and correspond with positive returns for those firms. The study suggests that companies may responsibly leverage long-term debt to enhance financial structures and attract positive investor sentiment. The research recommends that financial analysts, policymakers, and corporate decision-makers in Kenya consider the implications of changes in long-term debt on security returns. Understanding this positive relationship can guide strategic financial decisions and inform the formulation of financial guidelines and policies conducive to sustainable corporate growth in Kenya. Further research is encouraged to explore specific industry sectors and risk factors associated with long-term debt for more targeted recommendations.

Full Length Research (PDF Format)