ECONOMIC FACTORS AND FINANCIAL PERFORMANCE OF THE PETROLEUM FIRMS IN KENYA

Abstract

This study sought to evaluate the effect of economic factors on financial performance of the petroleum firms in Kenya. The study used the causal research study design with a census of the subjects. Causal studies are concerned with learning how one variable produces changes in another. The target population was 50 petroleum firms in the industry up to the year 2018 operating along Nakuru-Nairobi. This was also the accessible population which represented 100% of all the 50 the firms targeted in this study. The study conducted a census of all the 50 petroleum firms. The researcher used close-ended questionnaires as the main primary data collection tool.  The secondary data was collected from the audited financial statements of the petroleum firms selected from the period 2011 up to 2018. The collected data was coded and cleaned before inputting it into the SPSS program version 21.0 for analysis. Descriptive statistics was employed in analyzing quantitative data and qualitative data was taken through content analysis and then organized into narratives. The study found out that oil price control had significant positive relationship with financial performance of the petroleum firms in Kenya; level of inflation had significant negative relationship with financial performance of the petroleum firms in Kenya; bank interest rate had significant negative relationship with financial performance of the petroleum firms in Kenya and global oil prices had significant negative relationship with financial performance of the petroleum firms in Kenya. The study recommended that CBK should come up with policies that regulate the banks interest rates to regulate them from arbitrarily increasing their interest rates; firms need to have strategies put in place to mitigate uncertainties in the interest rates; ERC need to come up with proper policies to curb the issue of inflated fuel prices and the government of Kenya should try to control inflation to avoid extreme inflation rates which negatively impact the petroleum firms and in turn affect the country’s economy. The study recommended further study to be done on other factors that affect the petroleum firms in Kenya other than economic such as government legislations and globalization. It further recommended replication of similar study in other countries to allow comparison and generalization of the study findings. 

Keywords : Company Performance,  Earnings per share, Energy Regulation Commission, Oil Marketing Company, Organization of the Petroleum Exporting Countries,  Price Regulation, Return on Equity and Sales growth.