Budgetary Process and Financial Performance of Manufacturing Firms Listed in the Nairobi Securities Exchange, Kenya
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Date
2023
Authors
Abdi, Mahat Bishar
Mutswenje, Vincent Shiundu
Journal Title
Journal ISSN
Volume Title
Publisher
IAJEF
Abstract
The financial performance of the
manufacturing companies listed on the
NSE, Kenya lends significantly to the
expansion of Kenya's industrial sector,
stock market, and overall economy. Due to
the different difficulties, this financial
performance could be jeopardized and
result in a falling trend. As proven during a
five-year period, from the years 2017 to
2021, some manufacturing enterprises'
financial performance continues to
deteriorate and fluctuate irregularly despite
having implemented budgetary processes.
Since the implementation of budgetary
procedures is meant to enhance financial
performance, the irregular financial
performance of manufacturing enterprises
persists. In light of this, it is yet unknown if
the budgetary process has a substantial
impact on the financial performance of
manufacturing enterprises. In light of this
context, the study aimed to ascertain the
relationship between budgetary process and
financial health of manufacturing
enterprises traded at NSE, Kenya. The
study's specific objectives are to ascertain
the impact of budgetary planning,
involvement, control, and evaluation on the
financial health of manufacturing
enterprises traded at NSE, Kenya. Research
hypotheses was evaluated at a significance
level of 0.05. Three theories—the
incremental budgeting theory, the prioritybased budgeting theory, and the risk-based
budgeting theory. The study employed a
correlational research design and the target
audience were forty five respondents from
nine manufacturing firms traded at the NSE
in Kenya from which the study adopted a
census. Primary data was used to collect
data on the independent variables whereas
secondary data collected data on the
dependent variable. The analysis procedure
entailed the utilization of descriptive
statistics with focus on means and standard
deviation, and inferential statistics by
running an OLS multiple Regression model
with the aid of SPSS Software (Version 26).
Normality, multicollinearity and
heteroscedasticity tests were run prior to the
actual analysis. The analyzed data was then
displayed using graphs, frequency tables
and charts. Ethical consideration measures
was adhered to during the entire research.
The study and found that budgetary
planning and budgetary control were
statistically significant and thus the null
hypotheses was rejected. Whereas
budgetary participation and budgetary
evaluation were both statistically
insignificant and thus the null hypotheses
was not rejected. The study recommends
the application of budget plans that are
generated utilizing historical data as a
reference point where it outlines the
allowances and variances to be applied to
the varying parameters before line
managers prepare budgets for each of their
departments to help improve the financial
health of industrial firms traded at NSE. It
also recommends that budgetary control
should start at the lowest levels, aligning of
real results and adhering firms strategic
planning and operational control that helps
to improve performance of industrial firms
traded at the NSE.
Description
Article
Keywords
Budgeting Process, Budget Planning, Budget Participation, Budget Evaluation, Budgetary Control, Financial Performance
Citation
Abdi, M. B., Mutswenje, V. S. (2023). Budgetary process and financial performance of manufacturing firms listed in the Nairobi Securities Exchange, Kenya. International Academic Journal of Economics and Finance, 3(9), 288-308.