Board Characteristics, Firm Size and Financial Leverage of Manufacturing Firms Listed At Nairobi Security Exchange, Kenya: Theoretical Review
Jagongo, Ambrose O.
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Kenyan manufacturing firms’ structural inefficiencies with huge uncontrollable debts levels coupled with poor performance poses a great threat to Kenyan economy. The sector is financed through debts and equity to avoid dire negative impact such as collapse arising from firm`s illiquidity. Kenyan manufacturing firms are crippled by poor corporate governance and huge unsustainable debts leading to stakeholders losing their investment and unsettled suppliers claims associated with poor financial management decisions. Kenyan manufacturing sector growth depicts a worrying declining trend .The government efforts in setting up sector`s improvement policies, have not yielded fruits .The financial leverage and the board of director’s characteristics have been identified as a root cause. The problem is catalyzed by numerous court cases against manufacturing firms` former directors on mismanagement and embezzlement of funds. This independent study paper offers a back ground and theorizes on financial leverage and board of directors characteristics. It provides literature and theoretical overview on the relationship that exists between financial leverage decisions and Board of director’s characteristics in manufacturing sector. This paper concludes that Board of directors characteristics affect financial leverage decisions and that firm size influences how much external borrowing a firm may secure. This paper indicate a need to an empirical research to ascertain the exert relationship between the board of directors characteristics, firm size and financial leverage of manufacturing firms.