Strategic conformity and fination distress among listed firms in nairobi securities exchange

Abstract

The main purpose of the study was to determine the relationship between strategic conformity measures and financial distress among firms listed firms in Kenya. This study was grounded on trade-off theory. The study employed panel analysis for a period covering ten years from 2006-2015. The target population comprised all 64 listed firms in Nairobi Securities Exchange. Secondary firm-level panel data was gathered from year-end financial reports for the period 2006-2015. Standard multiple regression analysis was used to analyze and test the hypotheses. The study found a positive and significant effect of nonproduction overhead (β=0.914; p<0.05) and financial leverage (β=0.824; p<0.05) on financial distress. The study concluded that nonproduction overhead and leverage accounted for a significant variance on financial distress. This study recommends that the firms should take keen scrutiny of their financial structures. Moreover, firms should utilize the relatively cheap sources of finance since they tend to reduce the probability of firms in facing financial distress. Further research should focus on using different samples like private non-listed firms.