Effects of Capital Structure Decisions on the Financial Performance of Hotel Industry in Kisii County, Kenya

Abstract

The purpose of the study was to examine the effects of capital structure decisions on the financial performance of hotels in Kisii County. The objectives of the study were to identify the effects of debt financing decisions, equity financing decisions and retained earning decisions affect the financial performance of the hotel industry in Kisii County. A survey study design was adopted. The total target population was 180. Stratified random sampling method was used to get the sample size, 30% of the targeted population. hotels and respondents, respectively. The sample size 54 respondents were used and it comprised The collected data was analyzed using descriptive statistics, percentages and five point likert scale was used for in depth analysis. The analyzed data was then presented using tables and figures. The study findings observed that the mix of long term and short term debt was most popular. Then finally, the common stock ranked third in that order. The study recommended that the hotel and lodging operators and entrepreneurs should consider internal financing during initial and final stages of operations and prefer debt as a second alternative in financing on-going operations. The study also recommended that the government through the tourism board and other donor agencies should consider providing incentives to small and medium enterprises by reducing lending interest rates and increase repayment window period.