Browsing by Author "Gichuki, Shelmith Wanjira"

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    Capital Structure and Financial Performance of Kenya Tea Development Agency Processing Factories in Nyeri County, Kenya
    (Kenyatta University, 2025-11) Gichuki, Shelmith Wanjira
    Globally, save for China, the tea industry has faced a significant market decline. The general performance of the Kenyan tea industry posted mixed results, but more often demonstrated a declining trajectory. The financial performance of the tea factories, as shown by profitability metrics and dividend payout ratios, indicated a decline. Group financial results put the dividend payout ratio at 14% in 2020, 12% in 2021, 10.5% in 2022, and 11% in 2023. Prudent and well-researched financing decisions have the potential of optimizing the benefits accruing from consumption of funds while minimizing the risks involved. The study sought to establish the effect of capital structure on the financial performance of tea factories in Nyeri County, Kenya. Specifically, the study aimed to determine the effect of long-term debt, short-term debt, internal equity, and external equity on the financial performance of Kenya Tea Development Authority managed tea factories. Financial performance was assessed using the dividend payout ratio, an insightful profitability metric. The study used a causal research design. The study employed the census method, which involved collecting data on all six Kenya Tea Development Authority-managed tea factories in Nyeri County. The study relied on secondary data collected from all six tea factories for the period 2013 to 2022, making a total of 60 observations. The data was quantitative in nature. Panel regression analysis was used for the time series data. Descriptive and inferential statistics were used for analysis. The descriptive statistics included means and standard deviations. Diagnostic tests were carried out to test the assumptions in the study. The researcher was guided by Kenyatta University ethical codes when collecting, analyzing, and citing the literature. The findings indicated that short-term debt had a positive coefficient of 0.076 with a highly significant p-value of 0.001, suggesting that increasing short-term debt positively affects firm performance, likely due to its flexibility and lower interest costs. Internal equity also had a positive and significant effect, with a coefficient of 0.081 and a p-value of 0.006, highlighting that retained earnings are a valuable financing source, supporting stability without increasing debt obligations. External equity showed a positive effect as well, with a coefficient of 0.054 and a p-value of 0.034, implying that funding from external investors contributes to firm performance by providing capital without immediate repayment, thus enhancing reinvestment capabilities. Conversely, long-term debt presented a positive but statistically insignificant coefficient of 0.064 (p = 0.287), indicating that it does not play a substantial role in enhancing performance, potentially due to higher interest costs and repayment terms that may counterbalance its benefits. These results underscore that short-term debt, internal equity, and external equity are effective financing sources for Kenyan tea factories, while long-term debt may be less critical, reflecting the industry’s preference for financing methods that support liquidity and flexible growth.
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    Internal Equity and Financial Performance of Kenya Tea Development Agency Processing Factories in Nyeri County, Kenya
    (International Academic Journal of Economics and Finance, 2025-07) Gichuki, Shelmith Wanjira; Farida Abdul
    The tea industry globally has faced a significant market decline, with the exception of China, where the sector showed resilience. The Kenyan tea industry, in particular, has experienced mixed financial results, often demonstrating a declining trend in performance. This decline is evident when examining the financial performance of tea factories in Kenya, as reflected in profitability metrics such as dividend payout ratios. For instance, the Kenya Tea Development Authority (KTDA)-managed tea factories posted declining dividend payout ratios: 14% in 2020, 12% in 2021, 10.5% in 2022, and 11% in 2023. These figures suggest challenges in maintaining profitability, which are compounded by factors such as fluctuating market prices, cost pressures, and financing choices made by the factories. Financing decisions are critical in determining the success of any business, particularly in capital-intensive industries like tea production. Prudent financing decisions have the potential to optimize the utilization of funds while minimizing associated risks, thereby contributing to improved financial performance. A key element of these financing decisions is the capital structure, which includes a combination of debt and equity financing. For tea factories, a wellbalanced capital structure could mean the difference between maintaining liquidity, achieving profitability, and sustaining growth. The specific objective of this study is to examine the effect of internal equity— primarily retained earnings—on the financial performance of KTDA-managed tea factories in Nyeri County, Kenya. Internal equity, as a financing source, allows firms to reinvest profits back into the business without increasing debt obligations, potentially offering greater financial stability. This study focuses on internal equity’s relationship with financial performance, measured through the dividend payout ratio, which serves as an important indicator of profitability. By analyzing the capital structure’s role, the research aims to offer insights into how the use of retained earnings can influence the financial health of tea factories, especially in an environment marked by economic challenges and market volatility. The findings from this study could help inform better financial strategies and decisions within the Kenyan tea industry.