EFFECT OF ACCOUNTING INFORMATION ON FIRM FINANCIAL PERFORMANCE: A CASE OF AGRICULTURAL FIRMS LISTED IN THE NAIROBI SECURITIES EXCHANGE
Abstract
The purpose of the study was to investigate the effect of accounting information on firm financial performance of agricultural firms listed at the Nairobi Security Exchange. The study was guided by two objectives; to establish the effect of liquidity on the financial performance of agricultural firms listed at the Nairobi securities exchange and to determine the effect of dividend payout on the financial performance of agricultural firms listed at the Nairobi securities exchange. The study adopted a descriptive research design. The target population consisted of all the listed agricultural firms at the Nairobi Securities Exchange (NSE). The study used stratified sampling technique. The study’s sample was classified into three strata; senior managers, line managers (finance department management) and the junior staff of the companies. Primary and secondary data was used where primary data was collected using questionnaires. The secondary data was obtained from the company’s published reports. Data analysis was done qualitatively and quantitatively using the statistical package for social scientists (SPSS V20) for both descriptive and inferential statistics. Regression analysis was used to show the sensitivity of profitability (PBT), ROA and ROE to various independent variables. The findings indicated that there was an increase in financial performance in the firms .This was demonstrated by the extent of agreement with the statements in the questionnaire regarding financial performance. Findings indicated that liquidity and a dividend payout affected financial performance agricultural firms listed on NSE. Findings led to conclusion that liquidity was a significant tool in explaining financial performance. It was also possible to conclude that there was a positive and significant relationship between level of dividend payout and financial performance; it was possible to conclude that there was a positive and significant relationship between leverage and financial performance. From the findings and conclusion, the study recommended that there was need for agricultural firms listed at the Nairobi Securities Exchange to increase their current assets so as to increase their liquidity as it was found that an increase in current ratio positively affect the financial performance. Another study be undertaken to cover other private agricultural firms in the broader industry.
Key Words: liquidity, Dividend Payout, Accounting Information
Full Text:
PDFReferences
Abor, J., & Quartey, P. (2010). Issues in SME development in Ghana and South Africa. International Research Journal of Finance and Economics, 39(6), 215-228.
Adejimi, A., Oyediran, O. S., & Ogunsanmi, E. B. (2010). Employing Qualitatively Enriched Semi Structured Questionnaire in Evaluating ICT Impact on Nigerian ‘Construction Chain Integration’. The Built & Human Environment Review, 3(1), 49-62.
Almajali, A. Y., Alamro, S. A. & Yahya, Z. A. (2012). Factors Affecting the Financial Performance of Jordanian Insurance Companies Listed at Amman Stock Exchange, Journal of Management Research, ISSN 1941-899X, Vol. 4, No. 2.
Bardia, S. C. (2004). Liquidity management: A case study of Steel Authority of India Ltd. Management Accountant-Calcutta-, 39, 463-495.
Berger, A. N., & Di Patti, E. B. (2006). Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking & Finance, 30(4), 1065-1102.
Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital structures in developing countries. Journal of finance, 87-130.
Borg, D., & Gall, R. (2007). Educational research: An introduction. Boston: Pearson Education.
Bryman, A., & Cramer, D. (2005). Quantitative data analysis with SPSS 12 and 13: a guide for social scientists. Psychology Press.
Burns, A., & Groove, B. (2003). The Practice of Nursing Research: Conduct, critique & utilization. 4th edition. W. B. Saunders Company.
Cardone Riportella, C., & Cazorla Papis, L. (2001). New approaches to the analysis of the capital structure of SME's: empirical evidence from Spanish firms. Working Paper 01-10, Business Economics Series 03, Universidad Carlos III de Madrid.
Crano, W. D., Brewer, M. B., & Lac, A. (2014). Principles and methods of social research. Routledge.
Eljelly, A. M. (2004). Liquidity-profitability tradeoff: an empirical investigation in an emerging market. International Journal of Commerce and Management,14(2), 48-61.
Faraway, J. (2002). Practical Regression and Anova using R. Retrieved 17th June, 2015, from www.r-project.org.
Fluck, Z. (2000). Capital structure decisions in small and large firms: a life-time cycle theory of financing. Working paper. New York: Stern School of Business.
Gay, L. R., Mills, G. E., & Airasian, P. (2009). Educational research: Competencies for analysis and applications. New Jersey: Person Education.
Harris, M., & Raviv, A. (1991). The theory of capital structure. The Journal of Finance, 46(1), 297-355.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.
Krasauskaite, E. (2011). Capital Structure of SMEs: Does Firm Size Matter? Empirical investigation of the Baltic countries. Aarhus University Business and Social Sciences.
La Rocca, M., La Rocca, T., & Cariola, A. (2009). Small Business Financing. Financial preferences throughout the life cycle of a firm. Working paper.
Lavrakas, P. J. (2008). Encyclopedia of survey research methods. Sage Publications.
Luigi, P., & Sorin, V. (2009). A review of the capital structure theories. Annals of Faculty of Economics, 3(1), 315-320.
Madhani, P. M. (2010). Realigning fixed and variable pay in sales organizations: An organizational life cycle approach. Compensation & Benefits Review, 42(6), 488-498.
Majumdar, S. K., & Chhibber, P. (2000). Capital structure and performance: Evidence from a transition economy on an aspect of corporate governance. Public Choice, 98(3-4), 287-305.
Mallik, A., Sur, D., & Rakshit, D. (2005). Working capital and profitability: a study on their relationship with reference to selected companies in Indian pharmaceutical industry. GITAM Journal of Management, 3(2), 51-62.
Margaritis, D., & Psillaki, M. (2007). Capital structure and firm efficiency. Journal of Business Finance & Accounting, 34(9‐10), 1447-1469.
Matumo, N. G., Maina, K. E., & Njoroge, N. N. (2013). The impact of front office Sacco activity on Sacco performance in Kenya; A case study of Meru South and Maara district in Tharaka Nithi County in Kenya. Global Advanced Research Journal of Management and Business Studies Vol. 2 (5), 285-290.
McLaney, E. J. (2000). Business finance: Theory and Practice. (5 Ed.). England: Financial Times Prentice Hall.
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 261-297.
Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574-592.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
Neuman, W. (2003). Social research methods: Qualitative and quantitative approaches (5th Ed.). Needham Heights, MA: Allyn and Bacon.
Neumann, W. L. (2000). Social research methods: Qualitative and Quantitative. Business Research Methods 8th ed. South-Western, Cengage Learning.
Nickell, S., Nicolitsas, D., & Dryden, N. (2007). What makes firms perform well? European Economic Review, 41(3), 783-796.
Noor, J. A. M., & Abdalla, A. I. (2014). The Impact of Financial Risks on the Firms’ Performance. European Journal of Business and Management, 6(5), 97-101.
Nunnally, J. C. (1978). Citation Classic-Psychometric Theory. Current Contents/Social & Behavioral Sciences, (22), 12-12.
Nyabwanga, R. N., Ojera, P., Simeyo, O., & Nyanyuki, N. F. (2013). An Empirical Analysis of the Liquidity, Solvency and Financial Health of Small and Medium Sized Enterprises in Kisii Municipality, Kenya. European Journal of Business and Management, 5(8), 1-15.
Olusola, A. J., Olugbenga, O. M., Zacchaeus, S. A., & Oluwagbemiga, O. E. (2013). Effect of Accounting Information on Investment in Nigerian Poultry Agricultural Sector. Research Journal of Finance and Accounting, 4(19), 124-132.
Omondi, M. M., & Muturi, W. (2013). Factors affecting the financial performance of listed companies at the Nairobi Securities Exchange in Kenya. Research Journal of Finance and Accounting, 4(15), 99-104.
Onaolapo, A. A., & Kajola, S. O. (2010). Capital structure and firm performance: evidence from Nigeria. European Journal of Economics, Finance and Administrative Sciences, 25, 70-82.
Pushner, G. M. (2005). Equity ownership structure, leverage, and productivity: Empirical evidence from Japan. Pacific-Basin Finance Journal, 3(2), 241-255.
Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.
Sarapaivanich, N. (2007). The Effect of Demand-side Factors on Accessing External Finance and Performance of SMEs in Thailand PhD Thesis, University of New England.
Saunders, M., Lewis, P. & Thornhill, A. (2009). Research methods for business students. (5th Edition). London: Prentice Hall.
Sur, D., Biswas, J., & Ganguly, P. (2001). Liquidity Management in Indian Private Sector Enterprises: A Case Study of Indian Primary Aluminium Producing Industry. Indian Journal of Accounting, 32.
Velnampy, T. & Anojan, V. (2014). Capital Structure, Liquidity Position and Their Impact on Profitability: A study of Listed Telecommunication Firms in Colombo Stock Exchange, Sri Lanka. Research Journal of Finance and Accounting, Vol. 5(9), pp131-139.
Vijayakumar, D. (2011). Cash Conversion Cycle and Corporate Profitability–An Empirical Enquiry in Indian Automobile Firms. International Journal of Research in Commerce, IT & Management.
Wang, Y. J. (2002). Liquidity management, operating performance, and corporate value: evidence from Japan and Taiwan. Journal of Multinational Financial Management, 12(2), 159-169.
Widegren, A. & Jörgensen, F. (2009). A Comparative study of Capital Structure between Conceptual and Traditional European Companies. Paper for the SNEE Conference in Molle, Sweden
Zikmund, G.W., Babin, B.J., Carr, C.J. & Griffin, M. (2010). Business Research Methods (8th ed.). South-Western, Cengage Learning.
DOI: http://dx.doi.org/10.61426/sjbcm.v3i4.397
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
PAST ISSUES:
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.