PHD-Department of Accounting and Finance

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Browsing PHD-Department of Accounting and Finance by Subject "Enterprises"

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    Business Specific Factors and Credit Rationing Among Registered Small and Medium Enterprises in Kiambu County, Kenya
    (Kenyatta University, 2020-08) Njagi, Gilbert Nyaga
    The economic potential of Small and Medium-sized Enterprises (SMEs) have been recognized worldwide. However, the existence of credit rationing has hampered realization of the same. The prevalence of credit rationing has been evidenced by the documented SMEs financing gap which is within the range of 2. 1 to 2. 6 trillion British pounds and the proportion of SMEs financing to total lending in the world, which averages 23.4 percent in any financial year. A similar credit rationing situation is being experienced in Kenyan, such that, on average SMEs are awarded at most 17.4 percent share of amount of loans available in the credit market. Hence, the study sought to establish the effect of business specific factors on credit rationing among registered SMEs in Kiambu County, Kenya. The specific objectives were: to determine the effect of business credit history, business repayment capacity, collateral and business size on credit rationing among SMEs in Kiambu County, Kenya. The study adopted positivism research philosophy and utilized explanatory study design. The target population was 41,115 registered and active SMEs located within Kiambu County, Kenya. A sample size of 397 SMEs was randomly selected based on inclusion and exclusion criteria:-that is having applied for credit once during the period of study (2013-2017) and denied or awarded less amounts than the amount applied. Structured questionnaire was used to collect data relating to business specific factors and credit rationing, while data on inflation was collected from Central Bank website by use of data collection sheet. The data were analyzed using descriptive statistics and inferential statistics got by undertaking logistic regression analysis. The results of correlation analysis indicated that the business specific factors were sufficiently different measures of separate variables, and consequently, this study utilized all the variables in undertaking logit regression analysis. In regard to logit regression analysis, the study found that: credit history, repayment capacity and size of business have statistical significance effect on credit rationing. However, collateral have statistical insignificance effect on credit rationing. The findings from the testing of moderating effect of inflation on the relationship between business specific factors and credit rationing indicated that there exists statistically significant moderating effect of inflation on the relationship between business specific factors and credit rationing. Guided by the findings, a number of recommendations were made. First, SMEs should comply on timely credit repayment as well as repayment of the required credit installment in order to improve their future credit evaluation. Secondly, SMEs should improve on the repayment capacity by managing their sales and expenses in a manner to improve on their net profits. In addition, the proprietors of SMEs should diversify on other sources of income which may increase the repayment capacity. Thirdly, the SMEs should improve on their sizes as reflected by capital employed and sales turnover. With regards to capital employed, the proprietors can enhance the policy of maintaining retained earnings, while the government can introduce seed capital to any new coming proprietors. Lastly, the existence of moderating effect of inflation implies that the government should institute monetary policies geared to maintaining inflation to a levels which should not adversely affect the borrower and the lender
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    Capital Structure and Financial Performance of Small and Medium Scale Enterprises in Buganda Region, Uganda
    (Kenyatta University, 2021) Mugisha, Henry; Job Omagwa; James Kilika
    Small and Medium Scale Enterprises are known to be drivers of economic growth in Uganda. According to Uganda Investment Authority, the projected 5.5% economic growth by 2030 was dependent on a sustained performance trend of SMEs. However, SMEs in Uganda have witnessed a persistent performance decline of up to 70 % business failure rate in 2018 from 50% in 2004, a problem attributed to persistently low levels of profitability of the SMEs. Empirical literature on the capital structure-financial performance relationship has remained contradictory in both the developed and emerging economies alike. Hence, the study sought to determine the effect of short-term debt, long-term debt, and equity capital on the financial performance of SMEs in the Buganda region, Uganda as well as the moderating and mediating effects of market conditions and financial capacity respectively on the capital structure-financial performance relationship of SMEs in Buganda region, Uganda. The study was anchored on tradeoff, pecking order, stakeholder, as well as the free cash flow theories. Positivist research philosophy was adopted as well as the analytical cross-sectional research design. Using stratified random and purposive sampling techniques, a sample of 453 respondents was selected from a target population of 133,454 SMEs. Data was analyzed using descriptive statistics, correlation as well as multiple regressions analyses (using STATA version 14). Hypotheses were tested at a 0.05 level of significance. Normality, multicollinearity, and heteroskedasticity tests were conducted preceding multiple regression analysis. Research ethical issues were adhered to accordingly. The study found that short-term debt had a negative and significant effect on financial performance; long-term debt had a negative and insignificant effect on financial performance while Equity capital had a positive and significant effect on financial performance. Market conditions had a positive and significant moderating effect, while financial capacity indicated a significant and partial mediation effect in the relationship between capital structure and financial performance. The study recommends that SMEs should employ less amounts of debt and adopt more of own funds in their capital structure to improve profitability. Policymakers should design policies that promote mobilization of own capital for SMEs to discourage borrowing as well as enhancing their access to the equity markets. SMEs should assess the market conditions as well as maintain adequate liquidity and solvency levels in the process of deciding the capital structure mix of their operations to optimize the output of their financial investment.
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    Venture Capital Financing and Growth of Small and Medium Enterprises in Nairobi City County, Kenya
    (Kenyatta University, 2020-09) Apuoyo, Benson Odhiambo
    The usage of venture capital is fundamental for the growth of Small and Medium Enterprises (SMEs) for economic and political development of a nation. SMEs in emerging economies do experience growth constraints compared to those in developed countries, in terms of institutional longevity, asset base, employment and revenue generation. Growth of registered SMEs in Kenya declined from 204 SMEs in the year 1999 to 47 in the year 2015 representing 77% drop in SMEs. Subsequently, over 50% of SMEs closed their businesses at the age of 4 years in Nairobi, yet Nairobi City County contributes over 50% of the national GDP. Main reasons for stagnation and closures are poor usage, cost and lack of finance. Realizing the difficulties of accessing credit from financial institutions, SMEs in Kenya seek alternatives sources of financing such as borrowings from relatives and friends which are unreliable and unsustainable. In retrospect, venture capital financing provides an alternative credit, a fundamental financial leverage which comes along with a simple and structured financing methods, cost and management support towards the SMEs. It has remained unclear, however, whether the usage of these critical financial leverages in venture capital financing do contribute to the growth of small and medium enterprises in developing countries as desired. Therefore, the general objective of the study was to investigate the effect of venture capital financing on the growth of small and medium enterprises in Nairobi City County, Kenya. The County has a higher concentration of both venture capital firms and small and medium enterprises. This study adopted positivist research philosophy. Descriptive research design was used to study the target population of 97 small and medium enterprises which had received venture capital financing over the last five-year period from 2013 to 2017. Using a stratified simple random sampling design technique, a sample of 79 venture capital backed SMEs was selected and questionnaires administered to obtain both primary and secondary data. The response rate of 64.56% was adequate for analysis and drawing inferences. The study used multiple regression analysis. To address various research biases common in multiple regression analysis, diagnostic tests were undertaken namely: Test for normality, homoscedasticity, multicollinearity and autocorrelation. The study found out that 48.4% of variation in SMEs growth was due to venture capital financing. The unexpected finding was that cost of venture capital financing is positively related to the growth of venture capital. The study found that the more the cost of venture capital was used the higher the growth realized by SMEs. This was because cost of venture capital was found to be responsible for the development of technical and management skills critical for the internal operation of the business, development of customer focused strategies and this immensely contributed to growth of the SMEs. The study further found that financing method has a positive effect on the relationship between venture capital financing and SMEs growth. It was also found that management support has a positive effect on growth of SMEs. Financial performance was found to be a significant partial mediator while regulatory framework was not found to be a moderator in the relationship between venture capital financing and SMEs growth. Given that cost of venture capital positively influences SMEs growth, the study recommends that a cost containment-revenue growth trade off strategy be embraced by both venture capitalists and SMEs and due consideration given to cost during the budgeting process. Venture capital-backed SMEs should embrace management boards for professional advice as this is a fundamental management support. Further research should be undertaken to establish other factors that explain the 51.6% variation in SMEs growth.