Cost of Capital as a Determinant of Financial Risk of Companies Listed on the Nairobi Securities Exchange in Kenya

Abstract

Financial risk is an important determinant of a company's performance and sustainability. This study assesses the effect of overall cost of capital on financial risk. The study used theoretical underpinnings to identify the factor and used survey research to determine its effect on company's listed on the Nairobi Securities Exchange (NSE). Purposive sampling was used to identify the sample from the list of publicly listed companies on the NSE. The study applies both qualitative and quantitative methods of data analysis. A pilot study was first conducted to test the reliability of the research tool, corrections made and then used for the research. The questionnaire was used to collect data from a purposive sample of 45 companies out of which 38 gave responses. Statistical Packages for Social Sciences (SPSS) version 24 was used for data analysis and results presented using tables and figures. The results were consisted with the alternative hypothesis of the study.