EFFECT OF FIRM CHARACTERISTICS ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVES SOCIETY IN KENYA
Abstract
The intention of forming cooperative societies is to empower members through savings and borrowings. In doing so, SACCOs ensure long-term sustainability through sensible financial practices. The value and contribution SACCOs are making to their members as well as to the country’s GDP is enormous. Recently, there has been continued growth and development in SACCOs which has been so beneficial but also costly. Many changes are taking place at ago which is proving a challenge to the SACCOs. New developments are requiring diverse resources to continue supporting growth. New legislations are being passed to regulate and supervise SACCOs in a bid to safeguard members’ interests. The big question is whether these changes are sustainable financially. Among the core objectives, all financial institutions have to meet their business expenses and make a return on the investment. Preferably, the financial institution must be in a position to attain financial sustainability and remain a going concern. Despite of all, these SACCO’s have to adhere to clearly stipulated operational criterion. It is against this backdrop that the current study examined the effect of firm characteristics on SACCO financial performance in Kenya. Specifically, the study sought to determine the effect capital adequacy, asset quality, operational efficiency and liquidity on SACCO financial performance. The study was based on signaling hypotheses, liquidity preference theory and profitability theory. The study adopted descriptive research design and a census of the population for a period of 3 years ranging from 2013 to 2015 was carried out. Descriptive statistics like mean and standard deviation were used to summarize the data. Also, the panel regression analysis was used to show the nature of the relationship between firm characteristic and financial performance of SACCO’s in Kenya. Results of the study revealed that capital adequacy, asset quality, operational efficiency and liquidity had positive and significant effect on financial performance of SACCO’s in Kenya.
Key Words: Capital Adequacy, Asset Structure, Operational Efficiency, Liquidity & Financial Performance
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i1.651
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