Browsing by Author "Mibei, Josphat"

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    Capital Structure and Financial Performance of Tea Processing Companies in Kericho County, Kenya
    (Kenyatta University, 2025-04) Mibei, Josphat
    The tea-growing sector plays a significant role in Kenya's economy. The financial performance of processing companies, particularly within Kenya's tea sector, has shown that financial performance has declined, as evidenced by the return on assets. Therefore, poor financial performance has raised several concerns among the stakeholders, a cause to which previous studies have not addressed conclusively. This pursuit of enhanced financial performance has led scholars and financial strategists to focus on capital structure as a critical component of financial strategies to improve firm performance. Therefore, this study examined how capital structure affects the performance of Kenyan tea processing enterprises in Kericho County. Specifically, the study scrutinized how financing of the tea growing companies in Kericho County using debt and equity financing will affect their financial performance. Additionally, the study assessed whether, firm size can moderate association between capital structure and the financial performance of tea processing companies in Kericho County. The study was anchored on Agency Theory, Modigliani and Miller's Proposition I and II and the Static Trade-Off Theory of Capital Structure. An explanatory research design was adopted, targeting three tea processing companies located in Kericho County, with a census approach employed to include all tea factories in the study. The research study used Secondary data primarily collected from the financial statements of these companies. Data was collected using documentary guides and data sheets. Before data analysis, diagnostic tests, including autocorrelation, multicollinearity, heteroscedasticity, model specification, and unit root tests, were conducted. The data was analyzed using inferential analysis and descriptive statistics including standard deviation, frequencies and mean. Inferential analysis focused on Pearson moment correlation to measure study variables correlation, and regression analysis to measure the strength of the study variables relationship. The panel data regression model was utilized. The results also depicted a negative correlation between return on asset, debt, and equity financing. Further, both debt and equity financing depicted a significant influence on the financial performance of tea processing companies. However, firm size had no moderating influence on the relationship between financial performance and capital structure. The study concluded that capital structure did not significantly influence the financial performance. Consequently, the study recommended that tea companies need to determine an optimal capital structure that maximizes returns and minimizes costs. This could involve a balanced strategy in leveraging debt and equity to finance operations and growth, thereby enhancing their financial performance. Above all the ethical considerations that govern research undertakings were adhered to