MST-Department of Accounting and Finance

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    Covid 19 Containment Measures and Financial Performance of Small and Medium Enterprises in Nairobi Central Business District, Kenya
    (Kenyatta University, 2024-10) Moochi, Jacob Abere
    In both developed and developing nations, SMEs are important economic engines. However, these businesses face numerous difficulties that have an impact on their financial success, in spite of their importance. COVID 19 is one of the most recent challenges. The government implemented a number of containment measures, including curfews, lockdowns, and social distance, to stop the virus from spreading. However, not much is known on how COVID 19 control measures impacted the SMEs in Nairobi, hence the need for this research. The study's target population consisted of 5000 SMEs that have licenses to conduct business in the Nairobi CBD. Primary was gathered from 370 SMEs owners. Stratified random sampling design was used for the selection of the respondents. Data collection was done using questionnaires and analysed SPSS. The respondents and their varied viewpoints on the implications of COVID-19 on the SMEs were analysed using descriptive method. Before data collection, an introduction letter and NACOSTI authorization were obtained. These helped to authenticate the study and convince the SMEs to cooperate and give data. Informed consent was sought from the respondents to make them fully aware of the study and the respondents were assured that high confidentiality would be upheld. Inferential analysis was used test the research hypothesis. This was done using correlation regression analysis. Before conducting inferential analysis, test for normality, multicollinearity and heteroscedasticity were done to determine the suitability of the data for regression analysis. The key limitation faced during the study included a reluctance by the SMEs to give data pertaining to financial performance and reaching out to the SMEs owners to partake in the study due to the spread of the virus. Based on the analysis, correlation coefficient of lock down was -0.614 which demonstrated a strong negative correlation between lock down and SMEs' performance. The study identified that the SMEs were impacted by curfew as indicated by a correlation coefficient of -0.406 and social distancing as indicated by correlation coefficient of -0.539. Regression analysis indicated that COVID 19 containment measures explained 73.96% of the performance of the SMEs. The study concluded that distribution of products and sourcing of raw material was highly disrupted by lock down. The study also identified that curfews had an impact on SMEs. Additionally, the study found that social distancing greatly limited the number of customers served by SMEs particularly in the service and transport sectors. To help the SMEs cope with COVID 19 containment measures, lending institutions are urged to actively consider giving SMEs loans based on favorable terms to enable them rebuild their ventures. The SMEs owners are recommended embrace saving and ensure that the funds they make is used properly. They are also recommended to adopt digital platforms and that many of them do not use them for businesses purposes. There is a need for the government to have a national disaster intervention fund to support the SMEs after COVID19. Regarding further studies, the study suggests the need for additional research in other counties in order to get better insights on how SMEs were impacted by COVID 19 containment measures. Also, conducting similar studies in other counties would help to compare the COVID effects in different areas. Additionally, it would be prudent to conduct other studies focusing on large firms. The findings will enable policy makers to better understand the challenges faced by SMEs and design effective policies to enhance their resilience and support job creation and income generation during economic downturns. For SME owners, the findings will highlight the effects of containment measures, enabling them to implement strategies to navigate the pandemic and prepare for future disruptions. Additionally, the research contributes to the academic literature by expanding knowledge on the impact of COVID 19 pandemic on business performance.
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    Prudential Regulations and Financial Performance of Microfinance Banks in Kenya
    (Kenyatta University, 2024-10) Muchai, Grace Wanja
    As financial intermediaries, microfinance banks are crucial. The growth of an economy is significantly influenced by microfinance institutions’ financial performance, in addition to their function in intermediation. Microfinance banks lack proper guidelines in managing their resources hence the need for prudential regulations to improve their performance and attract investors. The prudential guidelines and financial health of Kenyan microfinance banks were examined in this study. The precise objectives looked on how credit, capital adequacy, and liquidity regulations affected Kenyan banks’ financial performance. Lastly, the researchers looked into how the microfinance institutions’ size impacts prudential regulations and financial performance. The study was grounded in the theories of stakeholders, capital buffer, and liquidity management. The sample approach used was census sampling, and the research design was explanatory and also Empirical model will be used to analyses the data. The 13 MFBs that make up the target population and are accredited by the Central Bank of Kenya produced audited financial statements and yearly reports, which provided secondary data. Normality, multicollinearity, stationary, autocorrelation, heteroscedasticity, and diagnostic tests were performed on the data. Additionally, multiple regression analyses, correlation analyses, and descriptive statistics were carried out. The results show that capital adequacy regulations significantly influenced MFBs' financial performance, highlighting the importance of maintaining sufficient core capital. However, liquidity regulations did not significantly impact performance, suggesting customer deposit ratios may not be a critical factor. Credit regulation, specifically non-performing loans, had a significant negative impact, highlighting the importance of effective credit management. The association between performance and prudential regulations is not affected by MFB size. A beta coefficient of 0.0033 indicated that MFB size had a favorable effect, according to the data. Nevertheless, this effect did not reach statistical significance (p-value = 0.710, larger than 0.05). These findings highlight the importance of targeted and effective regulatory measures in the microfinance sector. Credit regulation, as measured by non-performing loans, had a statistically significant negative impact on MFBs’ financial performance. This conclusion demonstrates how essential it is for these institutions to have efficient credit control and management in order to keep their financial health in good standing. In order to abide by ethics guiding this research, research permit was collected from NACOSTI and also an introduction letter from the University. Furthermore, transparency and integrity were exhibited. Based on the study's findings, recommendations may be made to enhance both the regulatory environment and the operating procedures of Kenyan Microfinance Banks (MFBs). The requirements for adequate capital should be tailored to the specific size and risk profiles of individual MFBs, and the CBK should think about doing this. This can assist ensure the stability of these institutions, which is especially important considering the reported variances in capital sufficiency among MFBs.
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    Environmental Sustainability Reporting and Financial Performance of Firms Listed at the Nairobi Securities Exchange, Kenya
    (Kenyatta University, 2024-09) Kipngetich, Geoffrey C.
    Nairobi Stock Exchange (NSE) Plc has experienced inconsistent financial performance between 2019 and 2022. For example, total income decreased from Ksh. 782.4 million in 2018 to Ksh. 715.6 million in 2019, with profit before tax dropping from Ksh. 240.9 million to Ksh. 104.5 million. The following years continued to show fluctuating trends, highlighting the need to understand the underlying issues causing these inconsistencies. Additionally, there is variability in performance across different industries, with some sectors like banking and automobile recording growth, while manufacturing has seen a decline. Despite the recognized benefits of environmentally sustainable reporting, many firms in developing countries, such as Kenya, implement such practices mainly for compliance purposes. This study will aim to establish whether there is a relationship between environmental sustainability reporting and the performance of firms listed on the Nairobi Securities Exchange (NSE). The specific objectives will include examining climate action reporting, responsible consumption and production reporting, sustainable innovation reporting, and the success of NSE-listed companies' use of sustainable energy. Supported by stakeholder theory, institutional theory, the theory of CSR, and the theory of impression management, the study will employ an explanatory design. The target audience will consist of 116 respondents from 58 NSE-listed firms, adopting a census approach to include all listed firms. Data collection will be conducted using a semi-structured questionnaire, with pilot research preceding the main study. Quantitative data will be analyzed using descriptive and inferential statistics, while qualitative data will be examined through theme analysis. A multiple linear regression model will be used for analysis, and diagnostic tests such as normality, multicollinearity, heteroscedasticity, linearity, and factor analysis will be conducted. Ethical considerations, including informed consent, voluntary participation, anonymity, confidentiality, and potential harm, will be observed. The study anticipates finding that sustainable energy use reporting and sustainable innovation reporting significantly influence financial performance, accounting for variations among companies listed on the NSE. It is expected to conclude that there is a high correlation between the financial performance of NSE-listed firms and their environmental sustainability reporting. Effective implementation of sustainability reporting may enhance financial performance. The research will suggest that NSE-listed companies should strategically employ sustainability reporting by integrating sustainability into their business models, taking responsibility for the sustainability performance of their products and services, involving the entire company, and engaging in collaborations.
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    Financial Management Practices and Financial Sustainability of Public Universities in Kenya
    (Kenyatta University, 2024-10) Kimathi, Kathure Betty
    Public universities play a critical role through academic empowerment of the citizens and actively participating in knowledge dissemination and research in the society. However, despite being the centers of knowledge creation and development, one of the significant challenge facing public universities in Kenya is financial sustainability. This is evidenced by growing debt from financial institutions, unremitted statutory deductions and shrinking government grants. Whereas proponents of sound financial management practices (revenue diversification, budgetary control, and financial risk management) hold the practices as possible solutions for financial sustainability of every organization, few studies have been done to ascertain this position in Kenyan public universities. The objective of this research was to assess the effect of financial management practices on financial sustainability of Kenyan public universities. Financial sustainability was the dependent variable while revenue diversification, budgetary control and financial risk management were the independent variables. The study used modern portfolio theory, budgetary control theory and financial sustainability model to discuss the variables. Descriptive research design was adopted while targeting 41 public universities for the study. Random sampling approach was applied to select 22 out of the 41 public universities. Using a secondary data collection template, secondary panel data was collected from the office of auditor general for the financial years 2018/2019 to 2022 / 2021. Descriptive statistics, inferential statistics, multiple panel regression analysis and diagnostic tests were carried out to ensure the most appropriate analysis model was chosen and valid consistent results are achieved.The study found revenue diversification had a negative significant impact on financial sustainability using gearing ratio and a positive significant effect on financial sustainability using sustainability ratio in Kenyan public universities. On budgetary controls, the study found out that realized budgeted revenue had negative significant effect on financial sustainability using gearing ratio and a positive significant effect on financial sustainability using sustainability ratio. Utilized budgeted expenditure had negative insignificant effect on financial sustainability using gearing ratio and a negative significant effect on financial sustainability using sustainability ratio in Kenyan public universities. Lastly, in regards to financial risk management the research revealed credit risk using student debt ratio had positive insignificant effect on financial sustainability using gearing ratio and negative significant effect on financial sustainability using sustainability ratio while liquidity risk using current ratio had a negative significant effect on financial sustainability using gearing ratio and a positive significant effect on financial sustainability using sustainability ratio in Kenyan public universities. The study recommends thatpublic universities should explore innovative alternative sources of revenues and close revenue generating units whose marginal costs are higher than marginal revenues. The public university regulators and policy makers should develop policies to regulate key financial indicators including liquidity and student debt ratios in order to improve financial sustainability of Kenyan public universities
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    Financial Management Practices and Financial Sustainability in Mission Hospitals, Kiambu County, Kenya
    (Kenyatta University, 2024-06) Mwangi, Josphat Karanja
    Mission hospitals are vital institutions for providing healthcare services to communities, yet they face significant challenges to their financial sustainability. Factors such as declining donations and shifts in health insurance coverage have led to increased burdens of uncompensated care. This research focused on financial management1practices and their1impact on1financial sustainability in mission hospitals in Kiambu County. Specifically, the study investigated the effectiveness of financial planning and control practices, financing and funding practices, and working capital management practices in maintaining the hospitals' financial viability. Employing a descriptive1cross-sectional study1design, the research1examined the correlation1between these1financial management practices1and the1hospitals' financial1sustainability. Through purposive sampling, critical stakeholders involved in financial decision-making across eleven mission hospitals were targeted, resulting in a sample size of 242 respondents. Data collection involved administering structured questionnaires, followed by rigorous data analysis using SPSS version 22. The study aimed at providing evidence-based insights that inform policy and practice, aiming to strengthen the financial resilience of mission hospitals in Kiambu County. The results from1the multiple1regression model1 (R² = 0.392) indicated1that financial management practices account for 39.2% of the variation in financial sustainability among mission hospitals in Kiambu County. These results emphasize the effect of financial planning and control practices, financing and funding practices, and working1capital management1practices on the1financial sustainability1of the mission hospitals. The study illuminates the moderating influence of health sector regulations, which amplify the effectiveness of these financial1management1practices. Prioritizing the implementation of robust financial1management1practices throughout the mission hospitals is recommended to strengthen financial sustainability and ensure long-term viability.
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    Taxpayer Education and Tax Compliance by Water Vending Businesses in Hargeisa City, Somaliland
    (Kenyatta University, 2024-11) Hamse, Ibrahim Jirde
    The Inland Revenue Department, operating under the Somaliland Ministry of Finance (MOF), is tasked with overseeing the assessment, collection, management, and reporting of tax revenues in Somaliland. Among its responsibilities is evaluating the impact of taxpayer education on compliance with tax regulations within the country. Past studies have shown that taxpayers’ education has a positive influence in tax compliance. This research, therefore, aims to explore the impact of taxpayer education on tax compliance among water vending businesses in Hargeisa, Somaliland. The study's specific objectives are: to examine the effect of teaching basic tax principles; to assess the impact of communicating tax-related information for awareness; and to investigate how assistance with tax filing influences compliance within the water vending sector in Hargeisa. The study seeks to determine how the social and demographic characteristics of taxpayers moderate the relationship between taxpayer education and tax compliance among water vending businesses in Hargeisa, Somaliland. The study is underpinned by several theories: the Economic Deterrence Tax Theory, the Theory of Planned Behaviour, the Fiscal Exchange Theory, and the Slippery Slope Framework. A descriptive research design will guide the study's data collection and analysis methods. The target population includes 326 registered water vending businesses in Hargeisa City. The sample size was determined using the Yamane (1967) formula. Stratified sampling was employed to divide the population into two groups: retail water kiosk operators and bulk water wholesalers. From each group, simple random sampling was used to select respondents. Data collection was conducted using structured questionnaires distributed to 179 water vending business owners. Diagnostic tests performed included normality, multicollinearity, and model specification tests. The data was analyzed using a multiple regression model, and the findings are presented using tables, charts, and figures, showcasing both descriptive and inferential statistics. Ethical consideration was also observed. The study concludes that educational, communicative, and practical assistance strategies significantly enhance tax compliance among water vending businesses in Hargeisa City, Somaliland, emphasizing the importance of these strategies in improving tax administration efficiency. Teaching tax essentials significantly enhances tax compliance, highlighting the pivotal role of foundational tax knowledge in fostering understanding and adherence to tax obligations. Effective communication strategies significantly enhance awareness and compliance levels, underscoring the role of clear, accessible communication in fostering positive perceptions of the tax system and encouraging timely compliance behaviors. Providing practical assistance with tax filing significantly improves tax compliance, suggesting that initiatives aimed at simplifying tax procedures and enhancing digital accessibility can mitigate compliance barriers. Socio-demographic factors influence the relationship between tax education and compliance, highlighting the need for tailored education programs to address specific knowledge gaps and operational challenges unique to diverse business demographics. To improve tax compliance among water vending businesses in Hargeisa City, Somaliland, several actions are being proposed. Educators are enhancing tax education by targeting different groups with tailored strategies and clear explanations. Effective communication, including promotional activities, is being used to raise awareness. Practical assistance and digital tools are being provided to simplify tax filing, while socio-demographic factors are being considered to design targeted outreach programs. Further research is being recommended to assess the long-term impact of these strategies and to explore the role of digital tools and communication methods in enhancing compliance.
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    Audit Committee Characteristics and Earnings Quality in Tier One Banks in Nairobi City County, Kenya
    (Kenyatta University, 2024-11) Luvisi, Elizabeth
    The study investigates the correlation between audit committee characteristics and earnings quality in tier one banks in Nairobi City County, Kenya. The research addresses the research problem of determining which specific audit committee characteristics influence earnings quality in these banks. The study focuses on four key audit committee characteristics: composition, size, meetings frequency, and the role of the audit committee. The research employs a correlational design to ascertain the connection between the audit committee characteristics and the earnings quality. The target population includes six tier one banks in Nairobi City County. Data is collected through questionnaires administered to management at operational, middle, and lower levels. The study utilizes regression analysis to analyze the collected data. Key findings from the study indicate that audit committee composition, particularly the presence of independent directors, financial experts, and industry experts, is positively linked with earnings quality. Audit committee size and meetings frequency also demonstrate a positive relationship with earnings quality. Furthermore, increased involvement exhibited by the audit committee in financial reporting oversight is linked to higher earnings quality. The study recommends that companies carefully consider the composition, size, meetings frequency, and role of their audit committees to enhance earnings quality. Appointing independent directors with financial and industry expertise, maintaining an optimal audit committee size, holding regular meetings, and ensuring an active oversight role are crucial for effective audit committees. This study enhances the current body of knowledge on the effectiveness of audit committees and the quality of earnings. It also offers valuable insights for policymakers, regulators, and professionals in the banking industry. Subsequent investigations should investigate the influence of audit committee attributes on additional dimensions of corporate governance and analyze these associations in diverse geographical settings.
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    Financial Innovations and Performance of Small and Medium Enterprises in Embu County, Kenya
    (Kenyatta University, 2024-10) Njagi, Doris Murugi
    According to the Kenya National Bureau of Statistics Economic Survey in 2022, SMEs constitute 90 percent of all businesses in Kenya, contributing to 60 percent of the total employment. Despite their crucial role in economic growth and employment generation, Kenya's SMEs face substantial challenges, with a significant number failing to survive beyond their second year of operation. Financial innovations have therefore emerged as a potential solution to stabilize and bolster this sector. Financial innovations involve the development of new financial products and processes to enhance business operations, and they are increasingly necessary due to rapid technological changes. The study aimed at investigating the effect of financial innovations on the financial performance of SMEs in Embu County, Kenya. The specific objectives of the study were to determine the effect of product, process and system innovations on financial performance of SMEs in Embu County. The main theories of the study were: Diffusion of innovation theory, Schumpeter’s theory of innovation and the Contestable theory on innovation. The primary unit of observation is SMEs registered in Embu County, with a sample frame consisting of 250 SMEs within the County. The sample comprised of SMEs that were in operation since 2019, encompassing a five-year business cycle (2019-2023). Data was collected through structured questionnaires (primary data). Data analysis was done using SPSS Version 23.0. Various diagnostic tests including Multicollinearity, Normality, Stationarity Test, Heteroscedasticity, Autocorrelation and Test for Random or fixed Effect were carried out. Panel regressions analysis and Pearson’s product moment correlation analysis were used for inferential analysis while means and standard deviations were used for purposes of descriptive analysis. The results were presented in tables. Throughout the research process, the researcher adhered to ethical standards and principles, including integrity, informed consent, confidentiality and anonymity, privacy and research independence. The study acknowledged the contributions of other authors cited within the research. Correlation analysis indicated that both product innovations and process innovations had weak positive relationship with financial performance while system innovations had moderate weak relationship with financial performance. Feasible Generalized Least Square (FGLS) regression results indicated that product innovations (p=0.044, <0.05) and process innovations (p=0.034, <0.05) had a statistically significant positive effect on financial performance. On contrary, system innovation was found to have a statistically significant negative effect (p=0.012, <0.05) on financial performance. The study concludes that increasing both product and process innovations increases financial performance while increase in system innovations reduces financial performance. Consequently, the study recommends establishment of Embu SME Innovation and Growth Fund; For researchers and academia, it is crucial to conduct ongoing studies to identify the most effective process innovations; government should create incentives, such as grants and tax breaks; Researchers and academia should focus on understanding the underlying reasons for adverse effect of system innovations and disseminate their findings to inform better practices and lastly, SME owners should be cautious when implementing system innovations.
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    Public Financial Management Practices and Project Perfomance of Infrastuctural Projects in the Ministry of Transport, Kenya
    (Kenyatta University, 2024-11) Mutua, Martin Nzomo
    In the Kenyan context, public financial management grapples with a variety of issues, including corruption, suboptimal resource management, misalignment of project priorities, and administrative and managerial inefficiencies Despite the introduction of Public Financial Management Reforms, government ministries in Kenya continue to confront difficulties in project execution and performance, with corruption representing a major area of concern. For the development and maintenance of infrastructure projects in Kenya, the Department of Infrastructure in Kenya has not precisely been able to carry out this exercise. Perhaps because of financial constraints and management issues. The study thus aimed at establishing the public financial management practices and project performance of State Department for Infrastructure Kenya which is responsible for infrastructure development in the country. To achieve this, the specific objectives were as follows: to investigate the effect of legislative oversight, auditing practices, government regulations, and the adoption of IFMIS on the performance of projects within the State Department for Infrastructure. The study applied a descriptive research design with a target population of 234 respondents where stratified random sampling was used to select a sample of 70 respondents. The research gathered primary data through questionnaires, with a pilot study involving 10 employees from the KENHA. Analysis was done with software such as SPSS, STATA, and Microsoft Excel. The analysis included diagnostic tests to identify issues like autocorrelation, heteroscedasticity, multicollinearity, and normality. Multivariate regression, correlation analysis, and ANOVA were used to examine the data. Tables were employed to summarize responses and facilitate further analysis and comparisons. The study observed ethical considerations in regard to obtaining research approvals, confidentiality, anonymity and informed consent. The study established that auditing provides insights and recommendations for improving project management and government processes. Government policy provide road map that inform decision-making during the project, efficient public finance management systems have enhanced project performance at the state department for infrastructure. IFMIS improve project performance by giving correct and up-to-date data for budgeting and making decisions. The study concluded that legislative oversight, auditing practices, government regulation and adoption of IFMIS have positive significant impacts projects performance in the state department for infrastructure in Kenya. It was recommended that he state department for infrastructure should execute audit practices and project managers should ensure that infrastructure project comply with government regulations. Project managers should consider using IFMIS for it provides a robust platform for financial control and transparency. It was recommended that it was paramount to assess aspects determining the sustainability of sustainability of government sponsored projects in Kenya.
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    Portfolio Diversification and Profitability in Selected Commercial Banks in Kenya
    (Kenyatta University, 2024-11) Mutinda, Daniel Maweu
    The global trend in commercial banking profitability has taken a hit, especially in the 2023 economic climate. It is intricate to control a bank’s portfolio efficiently, concurrently decrease income, lower risks and be bound to managerial and policy constraints. The main problem undertaken by this study was that of the gap that exists in the study of diversification in a portfolio and gainfulness of commercial banks in Kenya. Whereas diversification was seen as a strategy to mitigate risks and enhance profitability, there was limited empirical evidence of its influence on Kenyan commercial banks’ profitability. Numerous studies undertaken in Kenya and beyond have examined portfolio diversification. However, there is still a gap in understanding the direct association pitting variation strategies and the success of Kenya-based commercial banks; to seal in the existing literature gap; the study thus sought to investigate the effects of portfolio variation on the gainfulness of Kenya-based commercial banks. The study's general objective was to investigate the influence of product and service variation on the monetary profitability of Kenya’s these financial entities. Four particular objectives guided this study: to uncover the effect of sectorial credit, revenue, deposit diversification and diversification of venture on the gainfulness of Kenya commercial banks. This analysis intended to determine the regulating influence of bank vastness on the link pitting banks’ multiplication of portfolios and their monetary profitability in Kenya. To guide the study, monetary linkage and delegated monitoring theory, modern portfolio theory, and shiftability theory were used. The study targeted the money-related data for all 39 commercial banks in Kenya from the year 2018 – 2023. The study further conducted an empirical review of previous literature to identify study gaps. Descriptive and explanatory research designs were used, with data collection methods being secondary sources for quantitative data. Quantitative data analysis involved descriptive statistics; regression analysis was done to scrutinize the impact of portfolio diversification on monetary profitability. Tests for normality, linearity, independence, and homoscedasticity were done before doing regression. The confidentiality and anonymity of participants were upheld and the data was only accessible to the researcher and the supervisor. Regression analysis revealed that sectoral credit diversification, deposit diversification, investment diversification and income streams diversification are all positive and significant. Bank size moderates the relationship between portfolio diversification and profitability of commercial banks in Kenya. The study highlighted the need for further research on the long-term sustainability of diversification strategies, especially in Kenya's banking sector. The study suggested that banks in Kenya should adopt effective loan recovery strategies, consolidate credit information, and cautiously diversify income streams to avoid financial risks. Strategic investments in government securities, real estate, and market securities are recommended. Further research is needed on sectoral credit diversification, long-term sustainability, and the influence of external factors on profitability.
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    Financing Structure and Firm Value of Agricultural Companies Listed at Nairobi Securities Exchange, Kenya
    (Kenyatta University, 2024-11) Choge, Kiplimo Kevin
    The agricultural sector is crucial for the economic growth of Kenya. In 2022, the sector made up 33 percent of the GDP directly and an additional 27 percent indirectly via its interconnections with other sectors. The industry employs around 40% of the whole population and over 70% of Kenya's rural population. Nevertheless, agricultural companies registered on the NSE have seen a decrease in their company value, as shown by their market capitalization. The market capitalization of agricultural listed enterprises had a substantial reduction from 6161 points to 2789.64 points between 2018 and 2022, indicating a major decrease in company value. The general objective of the study was to evaluate the effect of financing structure on the firm value of agricultural firms listed in the NSE. The research specific objectives were; to assess the effect of short-term debt, long-term debt, equity, and retained earnings on the firm value of agricultural firms listed on the NSE. The research was based on the pecking order theory, Modigliani and Miller theory, and the shareholder value theory. The target demographic consisted of the seven manufacturing enterprises that listed in the NSE. A comprehensive survey was conducted on all the manufacturing companies listed in the NSE. The analysis used secondary data from financial reports as issued in the NSE handbook and KNBS for the time frame of 2018-2022. Various diagnostic tests including Multicollinearity, normality, Stationarity, heteroscedasticity, autocorrelation and test for random or fixed effect was carried out. Inferential analysis was conducted utilizing panel regression analysis and Pearson's product moment correlation analysis, whereas descriptive analysis included calculating means and standard deviations. The findings of the Feasible Generalized Least Square (FGLS) regression demonstrated that short term debt (p=0.044, <0.05), retained profits (p=0.034, <0.05), and equity financing (p=0.0000, <0.05) had a statistically significant and positive impact on business value. In contrast, it was shown that long-term debt had a statistically significant adverse impact (p=0.034, <0.05) on the firm value. Correlation analysis demonstrated that short term debt and equity financing had a weak positive correlation with firm value; long term debt had strong positive correlation with firm value whereas retained earnings had strong negative correlation with firm value. The study concludes that increasing short term debt, equity s and retained leads to higher firm value. Contrary, long term debt leads to reduced firm value. Consequently, the study recommends that, companies increase short term debt, retained earnings and equity financing in their financing structure. The firms should reduce long term debt in their financing structure to enhance firm value.
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    Microfinance Services and Household's Income among Saving and Internal Lending Community Groups in Embu County, Kenya
    (Kenyatta University, 2024-10) Njeru, Caroline Wawira
    The saving and internal lending community groups have contributed greatly to the financial inclusion of Kenyan households and improved the economic standards of living of its citizens. However, it is still challenged with problems mainly due to common issues such as limited income diversification, insufficient savings, lack of access to credit, income volatility due to agricultural activities, limited financial literacy, and gender disparities. Tracing to this background is the motivation which examined microfinance services effect on the income of households among saving and internal lending community groups in Evurore Ward of Embu County, Kenya. With specific reference, the research established loans, savings and training services effect on the income of households while a touch of the effect of moderation of financial literacy was utilized to analyze the existing nexus concerning microfinance services and household’s income among saving and internal lending community groups in Evurore Ward of Embu County, Kenya. Greeman Bank model, Saving-Asset Accumulation model and Village Saving Model served as theoretical base of the study. Descriptive design was implemented following a population of 562 SILC practicing group members in Evurore Ward where proportionate sampling technique was applied to arrive at 291 respondents. Primary data was sourced employing the utilization of structured questionnaire. Premise on the existing framework, the field information was evaluated descriptively and regressionally with the outcome presented in tables and diagnostic tests were included to verify data’s credibility. Adherence to strict ethical guidelines was followed thereafter. The outcome unveiled a significant positive effect of microfinance loans on household’s income; the effect of microfinance savings on household’s income among SILC groups was not statistically significant but positive; microfinance training had a significant positive effect on household’s income among SILC groups; and financial literacy had a negative and statistically significant moderating effect on the linkage concerning microfinance services and household’s income among SILC members in Evurore Ward, Embu County, Kenya. The survey recommends that to further enhance the income-generating potential of SILC groups, it is necessary to promote increased access to microfinance loans. This can be achieved by collaborating with microfinance institutions, NGOs, and government agencies to expand the availability of microfinance loan programs tailored to the needs of SILC groups in the area.
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    Capital Structure, Capital Intensity and Profitability of Insurance Firms Quoted at Nairobi Securities Exchange, Kenya
    (Kenyatta University, 2024-10) Kanda, Ben Yator
    The profitability of insurance firms has been unstable during the preceding ten years, mostly due to the insurance industry's bad investment and financing choices. Despite widespread agreement that choosing a financing framework is a major component in determining financial success, there is a lack of empirical research on the topic, especially in the insurance industry. The study's guiding research team set out to compare the financial health of insurance firms trading on Kenya's stock market based on characteristics related to their funding arrangements. Several factors were considered in order to arrive at an evaluation of the specified insurance firms' financial performance. Various forms of finance, including short-term and long-term loans, as well as internal and external funds, were taken into account. In this specific context, the study set out to assess how the degree of capital intensity affects the relationship between the financial framework and economic performance. The ideas of financial structure, agency theory, and Modigliani and Miller's pecking order theory formed the basis of the research. The inquiry was grounded on these ideas, which provided the empirical basis. The study used an explanatory research design in line with the principles of positivist research approach. The goal of this inquiry was to examine six separate insurance firms. From 2012 through 2019, a total of eight years, all of these businesses were traded on the national stock exchange. Using a checklist for systematic reviews, we combed through secondary materials that may be useful for our investigation. Data analysis made use of many statistical methodologies, including descriptive statistics, panel regression analysis, and Pearson correlation. To identify the issues with the data, many diagnostic procedures were performed. Among these tests were the following: the normality test (Shapiro-Wilk), the stationarity test (Hausman), the serial correlation test (Woollard), the heteroscedasticity test (Breusch-Pagan/Cook-Welsberg), the panel unit root test (Levin-Lin-Chu), and the multicollinearity test (pairwise correlation analysis). Data analysis allows one to conclude that long-term loans significantly hinder one's ability to become financially successful. In addition, the effect is substantial from a statistical standpoint (p < 0.05). Statistical significance (p < 0.05) shows that short-term loans, internal and external funding, and both have a significant impact on economic performance. Since the p-value was greater than 0.05, it was concluded that capital intensity did not have a statistically significant influence on the link between financing structure and financial performance. The study's results showed that long-term loans were only slightly associated with better financial outcomes. However, there was a far stronger correlation between internal and external finance and financial performance. Additionally, financial performance improved in tandem with the amount of short-term loans. It turned out that this was true. Finally, for insurance businesses registered on the national stock market in Kenya, the amount of capital investment did not significantly affect the connection between the financing structure and economic performance (p > 0.05). It was ultimately decided upon that. According to the report, insurance businesses that are Quoted on the national stock market might streamline their funding and boost their financial performance by renegotiating their loans
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    Profitability, Leverage, Efficiency and Financial Distress in Commercial and Manufacturing State Corporations in Kenya
    (Kenyatta University, 2024-10) Kibe, Peter Njoroge
    Since attainment of independence to date, the Government of Kenya has heavily funded and invested in various State Corporations. In spite of this State funding, Commercial and Manufacturing State Corporations continue to struggle financially and have resorted to the Government for debt bailouts and on many occasions, the accumulated losses have eaten up these State Corporations, leaving huge loans that are paid from the exchequer. In recent years, the Government of Kenya has spent billions of shillings to fund the recovery of various cash strapped State Corporations which have not been able to honour their debt obligations. The increased number of State Corporations facing financial crisis in the recent past therefore prompted this study. The major goal was to investigate effect of profitability, leverage, and efficiency on financial distress in Commercial and Manufacturing State Corporations in Kenya. Consequently, specific objectives included; determine effect of profitability on financial distress; analyse effect of leverage on financial distress and to establish effect of efficiency on financial distress in Commercial and Manufacturing State Corporations in Kenya. The study also attempted to determine moderating effect of firm size on relationship between profitability, leverage, efficiency and financial distress. The study adopted positivist philosophy that required researcher to be independent of the study. Explanatory non experimental research design was used in the study. For the purposes of this study, a census of 25 Commercial and Manufacturing Corporations was employed in study. Study used Secondary data from audited accounts of State Corporations for period 2015-2021 in analysis. Data was obtained from office of auditor general and Kenya Parliament digital library. Researcher used Logit Regression Model to analyse quantitative data. Diagnostics tests included multicollinearity, heteroscedasticity and likelihood ratio and Hosmer-Lemeshow goodness of fit tests. Study used STATA Version 13.10 statistical software to analyse data and findings presented using tables. Results indicated that profitability, leverage and efficiency were statistically significant to financial distress. However, the moderating influence of firm size on the relationship between profitability, leverage and efficiency was statistically non-significant to financial distress. The study recommended that in order to increase profitability, Commercial and Manufacturing State Corporations should improve their operational efficiency and reduce leverage (use of debt) particularly the government guaranteed loans. The study concluded that there is a dire need by State Corporations to reduce reliance on government loans and bailouts by engaging efficiently in profitable ventures that would maximise the wealth of the firm. The study also concluded that profitability, leverage and efficiency were useful ratios to management, those charged with governance and users of financial statement information in detection and mitigation of financial distress. Findings are also useful to the government by providing an insight of distressed firms so that the exchequer can know and make prudent decision on the distressed State Corporations that require financial bailouts
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    Camels Selected Financial Indicators and Financial Health of Microfinance Banks in Kenya
    (Kenyatta University, 2024-10) Imaana, Kimathi Andrew
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    Integrated Financial Management Information System and Resource Management in Kericho County Government, Kenya.
    (Kenyatta University, 2024-11) Kipngeno, Rotich Amos
    Kenya is divided into 47 devolved units, known as counties, which are required to utilize the Integrated Financial Management Information System to track financial resources and provide summaries of financial data. Despite the adoption of the Integrated Financial Management Information System to improve transparency and financial management, Kericho among others continue to face significant challenges in resource management resulting to high unpaid projects, pending bills, and corruption. Therefore, there is need to examine the Integrated Financial Management Information System in relation to county resource management. The main objective of the study is to establish the effect of Integrated Financial Management Information System on county resource management in the County Government of Kericho. The specific objectives are to establish the effect of financial reporting quality, internal control process, budget control process and financial accounting process on resource management in County Government of Kericho. Grounded in systems theory, resource-based theory, and agency theory, the study adopts a descriptive research design, targeting 96 county executives and 16 administrators. Data was collected via questionnaires and analyzed using descriptive and inferential statistics, including Pearson correlation and multiple regression analysis. Results were presented through tables, graphs, and charts. Key findings indicate that integrating financial reporting in Integrated Financial Management Information System improved financial control, transparency, and the quality of resource management, with a significant positive effect. Internal control process integration reduced corruption and mismanagement by enhancing financial auditing and tracking. Similarly, the integration of budget control processes facilitated e-transactions and e-procurement, leading to better financial allocation and reduced procurement costs. Furthermore, financial accounting integration improved accounting processes, cash flow access, and record-keeping, positively impacting resource management. The study concludes that integrating financial reporting, internal controls, budget controls, and financial accounting within Integrated Financial Management Information System significantly improves resource management in county governments. The study recommended that the County Government should strengthening financial controls, improving audit and cash flow management, ensuring reliability in financial statements, controlling budgetary allocations to minimize overspending, and simplifying financial accounting processes to enhance efficiency. These measures aim to mitigate corruption, improve resource allocation, and reduce operational costs in county governments.
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    Venture Capital Funding and Financial Performance of E-Commerce-Driven Firms in Kenya
    (Kenyatta University, 2024-11) Muinde, Victor Mwendwa
    Businesses that rely on e-commerce for growth frequently find that their ability to obtain sufficient capital is critical to their success. Funding from venture capital firms is essential in this context. Kenyan e-commerce businesses have faced financial challenges, impacting their success. Lack of funding hampers financial performance. Statista data reveals declining ROI from 4% to 1.3% (2016-2022), indicating profitability struggles. Several startups like OLX Kenya, ePay, and Rupu faced bankruptcy due to funding constraints and competition. The general objective of this study was to investigate the effect of venture capital funding on financial performance of e-commerce driven firms in Kenya. This study's main objectives were to evaluate the impact of cost of capital, financing methods and capital management support on the financial performance of Kenyan e commerce businesses. Additionally, the study sought to fully evaluate the moderating impact of regulatory structure on venture capital funding and the financial performance of Kenyan e commerce-driven firms. The trade-off, stakeholder, financial liberalization, and agency theories all lend credence to this research. The research philosophy of positivism, which emphasizes the use of empirical data to evaluate theories and hypotheses, was applied to perform this study. The study examined a population of 45 e-commerce-driven businesses that obtained venture capital financing between 2017 and 2022 using a descriptive cross-sectional survey research approach. A proportional sampling approach was employed to choose 45 e-commerce-driven businesses as a sample. Questionnaires were distributed to collect primary data. Important stakeholders, including investors, executives, and founders, were among the participants in the study. Descriptive statistics were employed to summarize the data, such as measures of central tendency (particularly the mean), variability (expressed by the standard deviation), and frequency distributions. Regression analysis, an inferential statistic, was also employed in the study to investigate the relationship between venture capital funding and financial success. The gathered data were coded before entering into the Statistical Package for Social Science program to make the analysis process easier. The analysis's final results were provided as tables. The findings showed that the cost of capital, financing methods, and capital management support significantly impact Kenyan e commerce enterprises' financial performance. Furthermore, the relationship between venture capital funding and the financial performance of Kenyan e-commerce enterprises is significantly moderated by regulatory structure. The study concluded that venture capital funding has a considerable impact on the financial performance of e-commerce-driven enterprises in Kenya and that this effect is strengthened by regulatory structure, as none of the four hypotheses were supported. The report advised management to thoroughly understand the total cost of capital related to venture capital funding. Management should weigh their trade-offs because every financing option has pros and cons. A legislative framework that supports and enables venture capital investments must be established. Tax incentives, streamlined bureaucratic processes, and regulatory simplification would encourage investment and foster a growth-friendly atmosphere
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    Portfolio Composition and Financial Performance of Investment Companies Listed at the Nairobi Securities Exchange, Kenya.
    (Kenyatta University, 2024-11) Cheruiyot K. Solomon
    Stakeholder choices are greatly swayed by potential gains from investment. They generally lean towards opportunities that promise heftier rewards rather than those that offer lower returns. The downward trajectory in performance observed in investment firms enlisted on the Nairobi Securities Exchange shoulders much of the blame for this. By scrutinizing the interplay between the financial performance of publicly traded investment ventures in Kenya and the makeup of investment portfolios, this inquiry sought to furnish a response to this query. The focal point of this inquiry was to assess the influence of portfolio composition on the profit margins of investment firms featured on the Nairobi Securities Exchange. Five investment firms listed on the Nairobi Securities Exchange were the subjects under investigation. To ensure a holistic grasp of the topic at hand, the research melded principles from other theories, including the Modern Portfolio Theory, Quantity Theory of Inflation, Capital Asset Pricing Model, Theory of Active Portfolio Management and the Black-Litterman Theory, to appraise a company's holdings. The scrutiny adopted a theoretical model to assess a company's holdings. The examination grounded itself on positivist philosophical tenets and a causal research approach. The five investment firms listed on the Nairobi Securities Exchange constituted the intended recipients of this inquiry, which was executed using secondary data procured from the exchange and the websites of the relevant investment firm. The research study commenced in 2015 and concluded after an eight-year span, terminating in 2022. To ensure the research was conducted within the bounds of legality and ethics, Kenyatta University and the National Commission for Science, Technology, and Innovation both provided their sanction for the study to gather data. In the data analysis phase, both descriptive and inferential statistics were brought into play. Descriptive statistics, including standard deviation, mean, and median, were presented in tables and charts. In terms of inferential statistics, panel regression analysis and correlation were applied. Prior to executing the panel regression analysis, diagnostic tests were administered to affirm the assumptions of the panel model. The outcomes gleaned from the panel data exhibited that venturing into equity funds exhibited a favorable connection with financial performance. Bond investments and financial performance displayed a feeble correlation. A slight and statistically insignificant affirmative correlation surfaced between real estate investments and return on investment. Mutual fund investments had a constructive and noteworthy influence on the financial performance of investment firms. The interplay between the financial performance of Kenyan listed investment entities and the composition of their portfolio was significantly shaped by inflation. The study indicated that the financial performance of investment firms registered on the Nairobi Securities Exchange was markedly influenced by the composition of their portfolio. The inquiry unearthed a substantial correlation between returns on investment and equity fund investments. Financial performance and investments in mutual funds exhibited a modest but constructive correlation. Bond and real estate investments were found to have no appreciable effect on the return on investment for listed investment enterprises. To enhance their financial performance and more effectively mitigate their firm's investment risk, the study recommended that investment company management uphold a well-balanced portfolio of investments. In an endeavor to refine their financial performance, investment firms should give heed to equity investments. This necessitated investing in dependable counters with superior dividend payout and appreciation potential
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    Internal Corporate Governance Mechanism and Firms Value of Selected Companies Listed at the Nairobi Securities Exchange, Kenya
    (Kenyatta University, 2024-11) Abdullahi, Guhad Ibrahim
    Corporate governance mechanisms can influence firm value. Larger boards are associated with inefficiencies in communication and moral hazard issues, ownership structure can result in excessive insider trading and board independence may not necessarily enhance firm value especially where the board members lack the necessary qualifications and experience. In Kenya, listed manufacturing and construction companies registered a significant decline in firm values which fell by an average of 29.9% from 2018 to 2023. The decline in firm value was registered in a period when the firms experienced significant changes in their corporate governance practices as CEO existed, new independent directors were appointed and the individual shareholders increased their ownership in the firm. Thus, the study's main objective was to ascertain how internal corporate governance practices affected the selected firm value in the NSE. The specific objectives included examining the effect of board size, ownership structure, and board independence on firm value, determining the mediating effect of profitability and the moderating effect of foreign capital flows on the relationship between internal corporate governance mechanisms and firm value. The study variables were anchored on Agency Theory, Transaction Cost Theory, Knight's Theory of Profit, and Efficient Market Theory. The research opted for the longitudinal design and collected panel data for 14 firms at the NSE covering the years 2014 to 2023. Data collection was from secondary sources, primarily annual financial reports. Data analysis encompassed both descriptive and inferential techniques, including means, standard deviations, and panel regression analysis using the STATA software. Diagnostic tests were conducted to validate the model and address potential issues such as multicollinearity, normality, stationarity, heteroscedasticity, and model specification. The study tested various hypotheses and found that board size positively affected firm value (p = 0.001 < 0.05, t = 3.41 > 6, β = 0.075), with the optimal size around nine members. Board independence was positively correlated with firm value (p = 0.006 < 0.05, t = 2.76 > 6, β = 0.008), emphasizing the importance of having independent directors. The study also found that ownership structure, while balanced, did not significantly influence firm value (p = 0.0287 > 0.05, t = 1.12 < 1.96, β = 0.065), indicating other governance mechanisms may be more critical. The mediating variable profitability significantly mediated corporate governance and firm value association with a β =0.344, (p = 0.025 < 0.05). The moderating variable foreign capital inflow was found to be a positive and significant determinant of foreign capital inflow. It explained 10.002% variance of firm value with a Beta of 1.85831. Recommendations for corporate managers include optimizing board size, increasing board independence, and enhancing profitability strategies. Policymakers are advised to promote balanced ownership structures and foreign investment. Stakeholders should advocate for governance practices that align with these findings to ensure sustainable firm value.
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    Financial Management Practices and Performance of Smallholder Farmers’ Tea Companies in the West Tea Block, Kenya
    (Kenyatta University, 2024-10) Kariuki, John Mwangi
    Smallholder tea farming in Kenya is a critical subsector since it provides a source of livelihood to over 750,000 farmers directly and indirectly to about 6.5 million Kenyans which represents 13% of Kenya’s population. Declining tea earnings by smallholder tea farmers threatens the sustainability of the tea sub-sector in Kenya. In addition, the decline in earnings by smallholder tea farmers is more pronounced in the West-Tea-Block as compared to East-Tea-Block. This had caused a great concern to the government and tea value chain stakeholders who were therefore seeking to unearth what is bedevilling the sub-sector and policy interventions necessary to reverse the decline. This study therefore investigated the effect of financial ’ management’’ practices’’ on the performance of smallholder farmers’ tea factory companies in the West Tea Block, Kenya. Specifically, the study investigated the effect of; financial planning, investment appraisal, financial reporting and funding decisions on performance of smallholder farmers’ tea factory companies in the West Tea Block Kenya. In ‘addition,’ the ‘study also determined the moderating’ effect of corporate governance on the relationship’ between’ financial management’ practices’ and performance of smallholder farmers’ tea factory companies in the West Tea Block, Kenya. The theories underpinning the study were the Theory of Budgeting, Real Options Theory, Performance-Based-Budgeting-Model, Net Income Theory and Agency’ Theory. This study adopted the positivist research philosophy and explanatory research design. A census was conducted on all the 34 smallholder farmers’ tea factory companies in the West Tea Block Kenya. Data was used and collected through a semi-structured questionnaire. Content, criterion, and construct related validity were confirmed accordingly. The study had a response rate of eighty five per cent. Descriptive statistics were applied to assess variables characteristics including standard deviation and aggregate mean scores. The multiple regression model was employed to analyze the effect financial management’ practices on performance. Content analysis was used to analyse qualitative data. The findings were that financial planning, investment appraisal, financial reporting and funding decisions had a significantly positive effect on ‘performance of smallholder farmers’ tea factory companies’ in the West’ Tea’ Block, Kenya. Additionally, the ‘study ‘revealed that corporate governance had a significant’ moderating’ effect on the relationship’ between’ financial’’ management’’ practices’’ and performance’ of smallholder farmers’ tea factory companies’ in the West’ Tea’ Block, Kenya. The study concludes that adoption and consistent application of good financial management’ practices enhances the performance of smallholder tea factory companies’ in the’ West Tea Block, Kenya. The study recommends that the management and boards of tea factory companies should ensure that clear policies on budgeting and budgetary control, investment appraisal, funding decisions and financial reporting are developed and implemented