Firm Characteristics and Profitability of Deposit Taking Savings and Credit Cooperative Societies in Nairobi City County, Kenya
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Date
2021
Authors
Mwangi, Macharia Robert
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Over the years, the continuous growth and development of saving and credit cooperative societies has been beneficial but also costly. New developments are requiring diverse resources to continue supporting growth. Notably, Millions of people across Kenya have been able to access formal financial services from saving and credit cooperative societies. However, the demand for the service continues to exceed the supply significantly due to the myriad of potential clients who have remained unattended. The poor profitability of saving and credit cooperative societies over the years has been a source of concern. This is as it affects the intermediation roles performed by these firms. Empirical studies on firm characteristics and profitability were largely based on other countries; studies focused on the Kenyan context were largely in the context of commercial banks. The study sought to fill the gap in literature and specifically establish the effect of firm characteristics and profitability of deposit taking saving and credit cooperative societies in Nairobi, Kenya. The specific objectives are to determine the effect of firm size, capital adequacy and liquidity on profitability of deposit taking saving and credit cooperative societies in Nairobi, Kenya. The current study made use of Market Power Theory, Capital Buffer Theory and Agency Theory to support the independent and dependent variables of the study. Causal research design was applied on a population made up of all the licensed deposit taking saving and credit cooperative societies under SASRA in Nairobi County, Kenya for the period 2014 to 2017 which are 34 in number. The study was based on a census approach. The study used panel data which was sourced from the financial statements of the respective saving and credit cooperative societies with the aid of a data collection guide. Data analyzed using panel regression model with the aid of stata version 14. Descriptive and inferential statistics were used to analyze the research data where various diagnostic tests such as multicollinearity, heteroskedasticity and hausman tests were one. Data was presented in form of tables. Ethical considerations were duly observed in the course of this study. The study findings on the descriptive analysis indicate that firm size and profitability Deposit Taking saving and credit cooperative societies in Nairobi Kenya had high fluctuations whereas capital adequacy and liquidity had minimal fluctuations over the study period. The study concluded that firm size had significant effect on profitability of Deposit taking saving and credit cooperative societies in Nairobi Kenya. The study concluded that capital adequacy and liquidity insignificant effect on profitability of deposit taking saving and credit cooperative societies in Nairobi, Kenya. The study therefore recommends that deposit taking saving and credit cooperative societies should put in place a well-functioning structure in line with growing firm size. This should be done for purposes of eliminating the bureaucracies that comes along with a growing firm size which in turn will ensure the profitability of deposit taking saving and credit cooperative societies in Nairobi, Kenya. The study suggests that further studies can focus on other institutions in the financial sector such as microfinance banks and commercial banks.
Description
A Research Project Submitted to the School of Business in Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration (Finance) of Kenyatta University, August, 2020
Keywords
Firm Characteristics, Profitability, Deposit Taking Savings, Credit Cooperative Societies, Nairobi City County, Kenya