Company Age and Short-term Debt of Companies Listed on the Nairobi Securities Exchange, Kenya

Abstract

Firms that are listed on the Nairobi Securities Exchange are looking for more cash to support their business operations and carry out particular development projects, thus they are gradually increasing the amount of debt finance that makes up their capital structure. This study aimed to investigate the effect of firm age on short term debt of firms listed on Nairobi Securities Exchange. This study was underpinned on form life cycle theory and pecking order theory. The study used secondary data which was obtained from the listed firms from 2007-2011. Panel data was used and the result showed a positive and significant relationship between firm age and short term debt of firm. From the results, the study recommends that management of companies should carefully consider the company’s age and the impact on debt maturity structure. They should also align short term debt strategies with company’s prospect and long term financial goals. Older firms with stable growth patterns may find short term debt suitable, while younger firms with higher growth expectations may benefit from other debt financing.