INFLUENCE OF PECKING ORDER HIERARCHY ON PERFORMANCE OF REAL ESTATE SECTOR IN NAIROBI COUNTY, KENYA
Abstract
Kenya's real estate market is well diversified in terms of income, geography and types. In terms of income, there is a clear segmentation of high, medium and low incomes. Real estate companies in Kenya have not adopted a pecking order hierarchy of financing. The main objective of the research was to establish the influence of the hierarchy on real estate performance in Nairobi County. The specific objectives of the study was to evaluate the influence of internal funds on performance of real estate industry in Nairobi County, to determine the influence of debt on performance of real estate industry in Nairobi County and to assess the effects of new equity on performance of real estate industry in Nairobi county. The study applied a descriptive research design and the target population was 69 companies. The study found that internal funds don’t have significant effect on performance of real estate industry in Nairobi County since the p-value of the t-test for this variable was 0.719. Debt does not have a significant effect on performance of real estate industry in Nairobi County as evidenced by the p-value of the t-statistic for the variable financial services were 0. 253. New equity has a significant effect on performance of real estate industry in Nairobi County as evidenced by the p-value 0.000 of the t-statistic which was below 0.05. The study concluded that real estate firms have not embraced pecking order hierarchy as an alternative method of financing which affects their performance. The study concluded that real estate firms in Kenya have low retention ratio which makes it difficult for them to grow their businesses. The study recommended that real estate firms in Kenya should encourage the investors in the company to forego their dividends so as to increase the retention ratio. Real estate companies should also increase their dividends as their profits increase to increase investor motivation and prevent potentials from leaving the company. To increase use of equity and venture capital as a source of financing requires real estate firms to sell their ideas to people who have money to invest.
Key Words: Pecking Order, Debt, New Equity, Internal Funds
CITATION: Kilonzi, F., Ibrahim, T., & Kanai, C. (2018) Influence of pecking order hierarchy on performance of real estate sector in Nairobi County, Kenya. The Strategic Journal of Business & Change Management, 5(4), 2124 - 2132.
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i4.1011
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