Stock Turnover and Corporate External Financing Decision by Listed Companies in Kenya

Abstract

The study sought to determine the influence of stock turnover on corporate external financing decision by companies listed at Nairobi Security Exchange.  A sample of 53 listed companies was purposively drawn and data derived from their daily and monthly trades at Nairobi security exchange for a period of 10 years from 2007-2016. The study used three proxies to measure external financing decision; Common equity offered (C.E), Straight Debt (S.D) and Covered Debt (C.D). Stock Turnover was measured by considering total daily share traded, total monthly share trades and annual share trades. The results established that equity financing decision is influence positively by an increase in a single unit of share volume traded relative to covered debt financing. Similarly straight debt financing was influenced negatively by one unit increase in share volume traded relative to covered debt financing. Holding other variables constant stock turnover was established to be significantly influencing corporate external financing decision. Therefore as the share volume traded increases by a unitary magnitude this has a significant influence on corporate external financing decision. It is therefore recommended that company managements should consider share counters and specifically market price per share at the exchange while making corporate external financing decision in order to enhance optimum corporate financing decision.