Influence of financial management practice on financial performance of sugar manufacturing companies in Kenya
Abstract
The objective of this study was to establish the influence of financial management practice
on financial performance of manufacturing companies using evidence from Kenya’s sugar
industry. The following specific objectives were addressed by this study: to determine the
investing practices on the financial performance of sugar manufacturing companies, to
assess the influence of capital structure practices on financial performance of sugar
manufacturing firms in Kenya, to evaluate the influence of liquidity practices on financial
performance of sugar manufacturing companies in Kenya and to determine the influence of
Board structure as a moderating factor on the financial performance of sugar manufacturing
companies in Kenya. This study was guided by Liquidity Preference model, Modigliani and
Miller Capital structure Model and agency theory. Most researches have concentrated
mainly on single financial management decision on the financial performance of
organizations. On this premise there existed a knowledge gap on the collective strategic
financial management practices practiced by sugar industry and financial performance of
sugar manufacturing industry, hence the need for this study. This research adopted a
descriptive research design in which a census of all the targeted population of 12
manufacturing companies jointly from sugar manufacturing industry were drawn from a list
of 800 manufacturing companies in Kenya, whereby a proportionate random sample of 109
employees were interviewed from all the 12 sugar manufacturing companies in Kenya.
Questionnaires were administered as the main tool of data collection whereby 102
questionnaires were collected representing a 93.6% response rate. Descriptive statistical
methods were applied to describe application of strategic financial management practices in
the sampled manufacturing companies which were sugar manufacturing companies.
Inferential statistical techniques such as Correlation analysis and regression analysis were
applied to test the hypotheses of association and differences. Collected data was processed
using the Statistical Package for Social Science (SPSS) which was the main computer
software that was utilized in data analysis. The strategic capital practices’ null hypotheses
were rejected implying a significant effect on financial performance. Strategic liquidity
practices were significant hence the null hypothesis was rejected. Strategic investing
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practices had coefficients of estimate which were significant implying that the null
hypothesis was rejected. Board structure was found significant implying board structure as a
moderating value has a significant influence on financial performance. It is therefore
recommended that it is important for firms to retain their profits so that they can reinvest and
gain higher returns on investments and shareholder equity furthermore Organizations need
to utilize computers in cash management since they are efficient and effective. This study
suggests the need for further research on other economic factors besides financial
management practices that influence the financial performance of sugar manufacturing
companies and other companies.
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