The main aim of my research is to get answer these questions 1- What is the correlation if interest rate increase or decrease and capital structure in the company in east African firms

The main aim of my research is to get answer these questions

1- What is the correlation if interest rate increase or decrease and capital structure in the company in east African firms?
2- If we use all theoretical framework does help to explain all variances

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The purpose of Research
In this research paper, different theories will used in order to reach empirical result of debt-equity choice. The sample of the population in this research will be 80 east African Companies in downstream (fuel stations).
Furthermore, I will focus in my research how the interest rate fluctuation and equity-debt are related last ten years. The models that I will use are trade-off agency and pecking.

(Hoesli, Gaud, & Bender, 2007) their study and determination in related to these three factors The first finding is adjustment to the target ratio about debt, The second one was performance about operating and and final one was market efficiency in financing choice that are not change when the leverage book is used and they tested some of European firm Hoestli & Bender reported the main factors of CAPM policies in the EU is Debt ratio, Operating Performance and marker Performance.
Their paper, the maturity was over 12 (years) when they examine the debt and equity choice applying case of European companies more than five hundred.
This research paper is interested because of my topic choice debt and equity in Africa Gaud, Hoestli & Bender also their research is European countries and they find when the managers of the companies prefer to issue debt so as to increase dividends of shareholder that means when the projects has profitable that is best debt disciplines of the managers.

The theory of the MM (Modigliani-Muller Theory)
Method of Trade off
Modigliani and miller (1958) Theory is censured, due to it mostly has exceptionally farfetched assumption and comes up short when taxes, default costs, or lopsided data were presented. But in their updated paper, MM (1963) they added taxes with their model.
The measure of debt utilized is emphatically related with the companies’ value, this hypothesis created by (MM, 1963). Additionally we can state manager utilize the hypothesis about amplifies debt 100% selection of assets by indicated as direct capacity of obligation and value radio likewise where is certain connection with company’s esteem and the debt.
For this Theory, it expect that there is no insolvency cost. In any case, there exists a balancing expense of obligation which maintains a strategic distance from this outrageous decision. There is an expanding worry of default with expanding utilization of obligation. In this manner, default is the adjusting factor for the extraordinary circumstance appeared by Modigliani and Miller in 1963
Although in 1984 Myers revised the idea of Modigliani and Miller (1963) and static exchange model. By asserting the advantage of utilizing debt and the monetary misery that happens in the probability of insolvency and increment the utilization of debt. As indicated, exchanging viewpoint has been constrained to the firm’s restricted credit score and the foundation of the capital structure of the firm.
Pecking direct hypothesis
Office perspective is risen up out of good hazard and irreconcilable situation amongst foremost and specialist. It proposes that specialists of the firm tend to take activities which are not best for the firm on the grounds that the advantages are higher than costs all things considered expenses are shared between investors.
The Modigliani and Miller (1958) works utilize symmetric date base on economic market. On the off chance that economic market can get to different information the stock will probably be chosen. In a setup, where productive market speculation holds and the greater part of the individuals from the market has an opportunity to achieve same data under equivalent conditions, there would not exist any issue related with awry data and all sources would be similarly ideal. In any case, in genuine world, due to the topsy-turvy data issues, firms like to get financing from sources where there exist most reduced measure of data asymmetry issues.

The principle thought behind the pecking request hypothesis that is, regularly, proprietor of an exaggerated organization wants to offer value while proprietor of an under forecast company utilizes value equity financing just if all else fails just firm investor need to know the valid about how the supervisors arrangement to augment estimation of the stock in showcase by the firm. Along these lines, individuals respond suspiciously when investor attempts to offer value. Consequently, the declaration of a value issue will diminish the estimation of offers of a firm (Ross, 1977).
(Berens and Cuny, 1995) mentioned a company takes after an inclination arrange in the event that it lean towards inner financing held income to outside financing and in the event that it favours obligation to value at capital structure of the company. (Berens and Cuny, 1995) likewise demonstrates that in the event that it is conceivable, utilizing a riskless debt ought to be similarly equity as inward financing. Be that as it may, if debt is accessible yet risk, it ought to be put somewhere close to held income and value of equity which really makes the pecking request.

Capital structure of small enterprises in different economies
As stated by Ang in 1991, explains that speculations of capital structure were not created with deduction of Small and medium enterprises in the lead position so they may not be specifically suitable for them. Notwithstanding, the legitimacy of capital structure hypothesis for Small and medium enterprises are tried experimentally in numerous nations. Notwithstanding size, there are two primary factors that separate small enterprises from big companies (Bhaird and Lucey, 2010). Firstly, small and medium enterprises proprietors’ longing for keeping their freedom and control. Secondly, the way that Small enterprises are having more extreme data asymmetry issues in financing choices. These are the sorts of the influence capital structure choices: so as to keep control, Small and medium administrators have a tendency to not permit to expand debt, notwithstanding for ventures with positive net present qualities. Likewise, due to data asymmetry issues, moneylenders are unwilling to give fund to Small enterprises. For instance, another written works demonstrate that, little and youthful firms have shorter keeping money connections, pay higher loan costs and will probably promise guarantee to obtain money.
In addition, According to Corridor, and Michaelas, (2004) they stated that a few investigations of the components influencing the Capital return of the structure of Small Enterprises in more nations. They added that there are contrasts in the components that influencing capital structures of SMEs, also almost dozens of years Mr Thurik worked at monetary information data of in excess of twenty unique firms by date examination on Germanys little ventures that working in the retail areas, he found there is huge impacts of the substantial resources, and sales. Anyway literatures are not utilize sales surely. Moreover, they watch that, non-obligation impose shields, estimated by devaluation costs, have no critical effect on debt proportions. The factors that they utilize have an impact on development structure of debt as opposed to add up to debt. Along these lines, the impacts on long and short debts tend to counteract. They watch that both industry attributes and time particular impacts have noteworthy effect on structure of companies.

In 1996 Chittenden investigate a U.K. database for an example of both recorded and unrecorded small enterprises with an accentuation on development and being cited in securities exchange. Employing OLS Regression, they locate that substantial resources, productivity, estimate and being recorded effectively affect capital structure of small companies.

Also found that insurances are utilized by moneylenders to take care of data asymmetry issue generally, particularly for small unrecorded firms. Besides, the significance of guarantee diminishes with the expansion in measure. Besides, long haul debts gave to little companies are generally in light of securities. They presume that financial boundaries to enter securities exchanges for little firms should be decreased and inventive arrangements are expected to take care of agency issue between small companies and loan specialists.

R.Hashim (2013). Again examined a U.K. database for Small and medium enterprises. Utilizing board information procedure, they locate that size, resource structure, benefit, development, future development conveniences, stock turnover, age and net indebted individuals have crucial impact on long and short debt levels. They find that duty rate has an inconsequential impact. Additionally, their outcomes show that normal long and short debt proportions of Small and medium enterprises increment amid times of monetary subsidence and diminishing as financial conditions make strides. Be that as it may, long haul debt proportion is emphatically connected with economic development.

Holmes, S. (2003) likewise inspect Kenyan Small and medium ventures. Utilizing OLS regression, they recorded that the execution, the limit, development of advantages and resource substantial quality are fundamental components to recognize the capital structure of the SME ventures. Additionally, what is distinctive in their investigation is that, they look at if there is a contrast amongst financing and firm qualities of little firms and generally bigger firms in the example. They partition their example into using median for total resources. They find that, the impacts of these components on capital structure are homogenous crosswise over little and big companies

A study done by Sorgb F.(2001). Tests how the firm attributes influence little endeavours capital structure in Spain. Their information comprises of 6,482 companies. Utilizing panel data examination, he concluded that the debtless tax protections and growth in profit have indirect association with leverage, then again the limit, development and the structure of the advantage have a direct association with leverage. . The outcomes bolster development coordinating guideline. That is, Kenyan firms are requesting their short run resources with here and now credits and their long run resources with long haul credit.

Another study worked by P.,Kappert in 2007 . Contemplated capital structure of Dutch Small enterprises. They utilize a panel data examination in their research. Their results are for the most part comparable with the request hypothesis of pecking. Which is, estimate, resource substantial quality, development of benefits and development opportunities are emphatically connected with leverage. Besides, they watch that Small enterprises like to utilize their incomes to diminish their credit and advance levels. Additionally they found that the business that the firm works in is likewise imperative factor for the capital structure of Dutch Small enterprises. They additionally bolster the development coordinating guideline.

Look at the capital structures of debt development decisions of 39 growing and developing nations including Kenya and Uganda. They compute the aggregate of use as the extent of aggregate debt to the market estimation of the firm. Market estimation of a firms is characterized as the market estimation of regular value included by book estimation of favoured stock and aggregate obligation. Besides, they utilize long haul obligation to add up to debt proportion as marker of debt development. Kenya and Uganda are found among five nations which have most minimal measure of aggregate debt capital structures.
Notwithstanding, when debt development is watched, Kenya is found as the fourth nation which has most elevated long haul obligation proportion while Uganda is the thirty seventh. This distinction originates from being a developed economy or not. Subsequently developed countries have more debt with long haul in structure of capital. With a specific end goal to research the distinction between countries, they utilize some nation particular measure like utilization of custom-based law, level of debasement, presence of an unequivocal insolvency code, presence of store protection. They give such measures from sources including International Country Risk Guide and Corruption Perception Index. All in all they find that, being a good economy, precedent-based law and low level of defilement are related with lower use of leverage and higher long haul debts. Related with USA they posted the extent of the unmistakable resources for the average assets. Productivity and size is decidedly and market-to-book proportions of firms are adversely related with both use and debt development.


Research Design and Sampling Method.
In order to find the best equity and debt choice for fund In East African firms in the last ten year period, this thesis study we will use both qualitative and quantitative research designs.
Due to variability of features among items in the population, we applied probability sample design in the sample selection process to reduce the distortion view risk of the population and made inferences about the population based on the information from the sample survey data. Only the sampled population will be subjected to the data gathering exercise to provide the necessary information to the study.

Data Collection
The two kinds of data collection will be utilized as a part of this research which are the primary and secondary data. Primary data acquired by distributing surveys to the examined firms through drop and pick later and in a few cases the examiner talked about the substance of the poll with the respondents and left them to be filled at their own opportunity. Secondary sources will be utilized to give data and information from distributed yearly reports and financing wellsprings of firms spreading over five years. In this investigation poll and reflection strategies will be utilized as a part of data collection. Primary data was utilized to gather information straightforwardly from respondents. It comprised of inquiries on skill and the mentality of best administration. Abstract technique was utilized to gather primary information from distributed reports and articulations gave by examined firms. Keeping in mind the end goal to build the reliability of the research, a blend of Data from Primary and Secondary sources will be utilized.
Data Analysis
Regression will be used to establish the relationship and differences between the independent factors (profitability, firm size, tax implications & structure of asset) and the dependent factors of debt and equity. Measurement of the data will be used SPSS. a software will be used in the work on quantitative data. Outcome from the annual financial reports and other articles will be posted in form of, graphs, charts, tables and narrative statements.
The Regression Components
= debt of a a company

= Equity of a company
= A Constant
= return of a a company
= Tax impact of a company
= capital structure
=Firm size
?= Standard error

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