School of Business
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Item Observed leverage and financial performance of listed firms in Kenya(2018) Maina, Leonard K.; Olweny, Tobias; Wanjau, Kenneth Lawrence https://orcid.org/0000-0002-3146-5324Capital structure management is one of the most crucial corporate financial management functions in a firm since appropriate debt policy is reported to maximize the value of a firm. Kenya is ranked second in Africa after South Africa in regards to financial deepness. This means that the cost of debt should not have adverse effect financial performance. This observation raises fundamental question: does debt financing leads to poor financial performance in Kenya? This research sought to investigate the role of observed leverage on financial performance of listed non- financial firms in Kenya. The study tested capital structure theories and therefore adopted a positivists approach, guided by causal research design. The study population was 35 non-financial sub-sector firms out of the 65 firms listed at the NSE, Kenya. 18 firms were excluded in this study since they belong to banking and insurance sub-sectors, which have a highly regulated capital structure. Secondary data collection sheet was used to collect data for each of the variables from audited financial statements of the listed firms for a 10-year period (2006-2015). Panel regression analysis revealed that observed leverage measured by (LDR) had a significant positive coefficient with performance metrics. However, the leverage measure using TDR showed a negative and significant role on performance metrics. This study recommends that for listed firms to improve their financial performance, they should use more long-term debts than short-term debts.Item Moderating Effect Of Bank Size On Nexus Between External Equity Capital And Financial Performance Of Lower-Tier Commercial Banks In Kenya(2023) Kinyua, Patrick Karuki; Kiai, Richard; Muriu, StephenThe Kenyan banking sector is categorized into three tiers, tier I, II and III based on bank size. The profitability of tier II and III has been declining begging the question as to whether the size of the bank has any influence on the performance of the banks. This study determines the influence of internal equity capital on the financial performance of lower-tier commercial banks in Kenya. The study employed a descriptive and explanatory research design. The study population was 26 commercial banks in Tier II and III commercial banks in Kenya from 2016 to 2020. The average internal equity for lower-tier commercial banks in Kenya was .364 in 2016 and .400 in 2017. In 2018, the internal equity sharply rose to 8.299, which was followed by a small decline to 7.782 in 2019 signifying that in 2018 and 2019, lower-tier commercial banks in Kenya employed more internal equity financing to finance their operations. Through the hierarchical regression, it was established that internal equity has a positive and significant influence on the financial performance of lower-tier commercial banks in Kenya. Bank size does not moderate the effect of internal equity on the net profit margin of lower-tier commercial banks in Kenya (p = .202>0.05; R2 change of 0.07). The study recommends that lower tier commercial banks need to encourage its shareholders to re-invest back their earnings rather than consuming them as dividends as internal equity is affordable and readily available when the bank is in urgent financial need.Item INNOVATIVE CREDIT MANAGEMENT PRACTICES AS A CATALYST FOR FINANCIAL PERFORMANCE: EVIDENCE FROM SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN NYERI CENTRAL SUB COUNTY, KENYA(2023-04-21) Gichuki, Fredrick GitahiThe World Council of Credit Unions recently selected the Kenyan Savings and Credit Cooperative Societies’ sub sector as the fastest growing in the world. The growing popularity and landmark growth of the sub sector is driven by the ability of the entities to meet clients credit needs on better and easier terms than other players in the financial sector. Scholars are in consensus that credit management is the foundation for stability and growth of modern-day enterprises. The research therefore sought to establish the influence of innovative credit management practices on the financial performance of the Savings and Credit Cooperative Societies. Specifically, the study aimed at establishing the effect of collection policy, credit risk controls, delinquency management and credit appraisals on performance of Savings and Credit Cooperative Societies in Nyeri Central Sub County of Kenya. The study was particularly interested with the financial aspects of firm performance and specifically exploited profitability ratio aspects measured through Return on Investment. The study also considered Credit Risk Exposure measures namely Portfolio at Risk and Write off Ratio The study was anchored on the Information Asymmetry Theory, Agency theory as well as the transaction Cost Theory as the key guiding theoretical models. The study adopted a census study of all the 15 active Savings and Credit Cooperative Societies in Nyeri Central Sub County as gathered from the Directorate of Co-operative Development of Nyeri County Government. The research targeted Chief Executive Officers and Credit Managers of all the entities together with the executive board which comprises of 4 members. This translated to a total of 90 respondents. The study used both primary and secondary data pieces. Questionnaires were the choice tool for collecting primary data. The questionnaire was dropped in person and then picked at a later date. The questionnaire was tested for validity and reliability using a pilot study, seeking expert opinion and Cronbach’s Alpha Reliability Analysis. Secondary data was gathered from the financial reports of the entities. Financial performance was considered for 5 financial years 2012-2016 for better understanding of performance over time. Secondary resources from the SACCO societies Regulatory Authority publications and reports were also useful. The study used the Statistical Package for Social Scientists to generate both descriptive and inferential statistics. Multiple linear regression analysis was used to explain the magnitude of effect of each of the variables under study on performance. Going by the results of the analysis, as explained by R Square which is the Coefficient of Determination, 81.50 % of the variation in the Financial Performance (the dependent variable) was explained by variability in the independent variables. From the results all the independent variables coefficients were found to be statistically significantly different from 0 (zero). As such, it was concluded that Collections Policy, Credit Risk Control, Credit Appraisal and Delinquency Management were all statistically significant predictors of financial performance. Pearson Correlation analysis results indicated a statistically significant positive relationship between all the independent variables; Collections Policy, Credit Risk Control, Credit Appraisal and Delinquency Management and financial performance.Item The Effects of Relationship Banking and Entrepreneurial Orientation on Financial Performance of Manufacturing Firms in Kenya.(KCA Journal of Business Management., 2017) Wanjau, Kenneth https://orcid.org/0000-0002-3146-5324; Kipkemboi, Rotich, AbrahamThe purpose of the study was to determine if relationship banking, and entrepreneurial orientation (EO) affect the financial performance of manufacturing firms in Kenya. The study adopted a cross-sectional research design with the population being 620 manufacturing SMEs involved in relationship banking with commercial banks in Kenya. Stratified random sampling was employed to pick a sample of 138 manufacturing SMEs with the respondents being the owner/ managers of the sampled SMEs. A semi structured questionnaire was used for data collection. The data was analyzed regression analysis with the moderating effects of EO being tested using the moderated multiple regression. The study revealed that EO moderates the relationship between relationship banking and financial performance of manufacturing SMEs in Kenya. The study concluded that relationship banking and financial performance have a positive relationship and that EO moderates this relationship. By forging strategic links with the banks, manufacturing SMEs would be able to access funding which is key to their growth and survival.