SOURCES OF CAPITAL AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS IN MOMBASA COUNTY, KENYA
Abstract
This study established the effect of sources of capital on financial performance of manufacturing firms in Mombasa County. The study was guided by two specific objectives: To determine the effects of bank financing on the on financial performance of manufacturing firms in Mombasa County, and to explore the effects of trade credit on the financial performance of manufacturing firms in Mombasa County. The study was anchored by Pecking Order Theory and Financing Hierarchy Theory. The literature review indicated that although access to finance is not easy to measure, financial depth (total loan outstanding) could be seen as an approximate indicator with direct and indirect effects on financing firms. Greater depth is to be associated with greater access for firms. The study adopted a cross-sectional survey research design. The target population of the study comprised approximately 100 employees in the selected Manufacturing firms in Mombasa County whereas 80 respondents were selected as the sample size. The researcher used questionnaires as a tool for data collection. The researcher used questionnaires as a tool for data collection. The questionnaires contained close-ended questions that solicited respondents’ views. Data analysis involve sorting, coding and transforming data into statistical information for the purpose of analysis and interpretation by use of SPSS. This study used quantitative data specifically descriptive statistics. Regression analysis was used. The findings were presented in the form of tables and percentages. The findings revealed that Bank financing have a positive influence on financial performance of manufacturing firms in Mombasa County. This finding was supported by the coefficient of determination which shows that the variations in financial performance are explained by Bank financing. On trade credit the study concluded that trade credit financing has a positive and significant effect on financial performance. From the findings, the study established that bank financing positively influences the financial performance. Therefore the study recommended that the government policy makers should reform Kenya’s manufacturing sector to make it easy for firms to access bank financing more easily to spur their financial performance.
Key Words: Bank Financing, Trade Credit
CITATION: Nyawa, J. M., & Mutuku, B. (2025). Sources of capital and financial performance of manufacturing firms in Mombasa County, Kenya. The Strategic Journal of Business & Change Management, 12 (1), 1 – 15. http://dx.doi.org/10.61426/sjbcm.v12i1.3194
Full Text:
PDFReferences
Admati, AR., and Pfleider, P. 1994) Robust financial contracting and the role of retained earningsists. Journal of Finance, 49(2), 371-402.
Amit, R., Brander, J. and Zott, C. (2019). Why retained earnings firms do exists? Theory and Canadian evidence. Journal business Venturing, 13, 441-466.
Amjed, S. (2011). Impact of Financial Structure on Firm’s Performance: A Study of Pakistan’s Chemical Sector. Society of Interdisciplinary Business Research (SIBR) Conference on Interdisciplinary Business Research.
Berger, A.N.., and Udell, G.F. (2019). The economics of small business finance; The roles of private equity and debtmarkets in the financial growth cycle. Journal Banking and Finance, 22(6-8), 613-673.
Bronwyn, A. (1995). Retained earnings Funding. Paper prepared for presentation at The President’s Conference onSmall Business. South Africa.
Cooper, D.R. & Schindler, P.S. (2019), Business Research Methods, New York: McGraw-Hill/Irwin.
Diamond, D (1991) Monitoring and reputation: the choice between bank loan and directly placed debt. Journal of political Economy, 99 (4), 689-721.
Dooley D. (1995). Social Research Methods. Prentice Hall, New Delhi. Eisenhardt, K.M. (1989). Agency Theory: An Assessment and Review. Academy of Management Review, 14(1), 57-74
European Retained earnings Association, 1987-1997, EVCA Yearbook (European Retained earnings Association, Zaventem, Belgium.
Fluck, Z., D. Holtz–Eakin and Rosen, H.S (2019). Where does the money come from? The Financing of Small Entrepreneurial Enterprises. New York University.
Frear J. and Sohl J.E (2002). The Characteristics and Value Added Contributions of Private Investors to Entrepreneurial Ventures. Journal of Entrepreneurial Finance. 6(1), 84-103.
Gompers, P.A. (1995). Optimal Investment, Monitoring, and the Staging of VentureCapital. Journal of Finance, 50(5), 1461-1489.
Government of Kenya. (2005). Sessional Paper No. 2 of 2005 on Development of Micro and Small Enterprises forwealth and Employment Creation for Poverty Reduction, Nairobi Government Printers.
Hisrich D.R. and Peters P.M. (2002). Entrepreneurship, McGraw – Hill Publishing Co. Ltd, New York.
Keushnigg, C. (2019). Retained earnings A case for Investment Promotion, Discussion Paper No 1887. London: Centre for Economic Policy Research.
Lerner, J. (1999). The government as retained earningsist: the long –run impact of the SBIR program. Journal ofBusiness. 72(3), 285-318.
Mallick, S. and Yang, Y. (2011). Sources of capital, Profitability and Productivity: First Evidence from Matched Firms. Financial Markets, Institutions & Instruments, 20 (5), 221 – 252.
Memba, S.F., Gakure, W.R., & Karanja, K. (2019). Retained earnings (V C): It’s Impact on Growth of Small and Medium Enterprises inKenya. International Journal of Business and Social Science, 3(6), 32 – 38.
Modigliani, F. and M. Miller (2020) The cost of capital, corporation finance and the theory of investment. American Economic Review, 48, 261-297.
Mugenda, A. &Mugenda, O. (2019). Research Methods; Quantitative and Qualitative Approaches. Africa Center for Technology (ACTS), Nairobi Kenya.
Republic of Kenya (2005). Sessional Paper No. 2 of 2005 on Development of Micro and small Enterprises for wealthand Employment Creation for poverty Reduction. Government Printers, Nairobi
DOI: http://dx.doi.org/10.61426/sjbcm.v12i2.3194
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.