The bonds market in Kenya has experienced tremendous growth in the recent past. Firms listed on Nairobi Securities Exchange (NSE) have gone ahead to undertake secondary bond issues as they pursue their growth strategies. Looking at the financial performance (Return on Equity) of these firms that have undertaken secondary bond issues, there are declines at particular periods after these issues. Understanding the effect of bond issues on financial performance is important for the survival of firms. Studies on the relationship between debt and financial performance of firms have shown that debt has an effect on financial performance. This study went further to find out the effect of debt in form of bond issuances on listed firm financial performance as measured by return on equity. The study collected dated from all the six firms that had issued bonds in tranches or additional bonds within the period 2008 to 2017. Data was analyzed via regression to assess whether bonds issuance has any effect on the financial performance of firms listed on NSE. Results indicate that about 75.4 percent of variance in financial performance could be explained by bond issuance as characterized by bond price, bonds coupon rate, bond proportion, and bond yield to maturity. Bond proportion and bond yield to maturity were found to have a statistically significant effect on financial performance. The study concluded that bond issues affected financial performance of listed firms in Kenya. It was recommended that the listed firms ought to take into consideration the various aspects of bond issues in order to enhance their financial performance.
Keywords: Financial Performance, Nairobi Securities Exchange, Return on Equity, bond issuance, bond price, bond proportion, yield to maturity