Debt capital, firm performance and change of CEO in firms listed on the Nairobi securities exchange
Corporate Ownership and Control
Department of Accounting and Finance, University of Nairobi, PO Box 30197, Nairobi, Kenya; Department of Finance, Risk Management and Banking, School of Management Sciences, UNISA, PO Box 392, Preller Street, Muckleneuk Ridge, Pretoria, Kenya
It is generally accepted that boards of directors play a fundamental role in corporate governance and the structure of the board plays a significant role in the functioning of a company (Jensen, 1993). The main objective of this study was to investigate the relationship between debt capital, firm performance, and change of CEO in firms listed on the NSE. The results of the study revealed that firms in which an individual shareholder has influence or controlling interest are reluctant to replace their CEO even when performance is below average. The results also revealed that the replacement of the CEO is not performance driven, but is debt capital driven. Specifically, the results suggest that medium leverage ratio is associated with change in CEOs on firms listed on the NSE. © 2015, Virtus Interpress. All rights reserved.