Winnie_Manuscript 2025.pdf

ABSTRACT

This study investigated the effect of debt structure on performance of the retail industry, guided by four research questions: How does the amount of debt affect the performance of retail industry in Eldoret town? How does the repayment period affect the performance of retail industry in Eldoret town? How does the cost of debt affect the financial performance of retail industry in Eldoret town? How does financial leverage affect the performance of retail industry in Eldoret town? An ex post facto research design was employed, targeting 2161 respondents, including shareholders, suppliers/creditors, managers, and supervisors. Stratified random sampling will select 337 participants. Questionnaires were employed to collect primary data. Document analysis was also used to collect secondary data. Face validity was achieved by ensuring adequate preparation of the instruments under the guidance, of expert opinion in establishing content validity. To ensure face validity, the supervisors read and analyze the questionnaire to ensure it makes sense. Also, the study did a literature review for content validity. To test construct validity, the study employed Pearson Moment Correlation. Cronbanch’s alpha was used to test the reliability of the measures in the questionnaire. Descriptive statistics described score distributions, and multiple regressions will test hypotheses. The study aims to enhance industry managers’ understanding of financial leverage, providing insights into its effects on performance. The study findings indicated that there was a significant relationship between amount of debt, cost of debt, debt repayment, debt structure and financial performance. The study concluded that there is a significant relationship between the amount of debt and the financial performance of retail firms aligns with existing literature on the role of debt in business performance. Efficient debt repayment strategies are crucial for maintaining a healthy financial structure, as they reduce the interest burden and improve cash flow, which ultimately supports better financial performance. The cost of debt, typically reflected in interest payments and other associated fees, directly affects a firm’s profitability by increasing its financial obligations. Debt structure refers to the proportion of short-term and long-term debt a firm holds, and its balance can significantly affect financial stability and profitability. The study recommended that retail firms should implement robust debt management strategies to optimize their capital structure.

Keywords: Financial Leverage, Debt Structure, Retail Industry, Financial Performance, Debt Management