Firm Size and Capital Structure Decisions: Evidence from Hotel and Lodging SMEs in Eldoret Municipality, Kenya

The purpose of this paper was to determine the relationship between firm size and capital structure decisions on the development of small and medium enterprises (SME’s) in Kenya, with special reference to hotel and lodges in Eldoret municipality.a descriptive survey research was used to carry out the study.Seventy two (72) respondents were sampled the study was guided by the following research questions: what is the relative size of hotel and lodging SME’s in Eldoret municipality, what are the financial source preferences of hotel and lodging SME’s in Eldoret municipality for financing initial investments, financing ongoing operations and financing future investment, What is the relationship between financial source preference and size of hotel and lodging SME’s in Eldoret municipality. Based on the findings, the study established that relationship between firm size and capital structure choice among hotel and lodging SME’s in Eldoret municipality considering self financing as the most preferred source of financing during the initial stages of their operation. Bank credit was most preferred for ongoing operations followed by retained earnings and share capital respectively. Future financing of the firm in hotel and lodging sector favored use of internal sources followed by us