Effect of Value Chain Financing on the Financial Performance of Agricultural and Manufacturing Firms Listed at the Nairobi Securities Exchange

Abstract

Despite government efforts to create a favourable business environment through substantial budgetary allocations and subsidies, the growth of the agricultural and manufacturing sectors in Kenya has been declining. This trend puts the country’s Vision 2030 in jeopardy. This study sought to establish the effect of Value Chain Financing (VCF) on the financial performance of Agricultural and Manufacturing firms listed at the Nairobi Securities Exchange. Trade payables, retained earnings, trade receivables, and bank borrowings were proxies for VCF, while Earnings per share (EPS) measured financial performance. The study was anchored on capital structure theories and adopted a descriptive research design with a survey approach. It utilized five-year secondary quantitative data between 2018 and 2022, collected from the audited financial statements of all 18 active agricultural and manufacturing firms listed at the NSE through a data collection sheet. The researcher performed descriptive and multi-linear regression analysis using IBM SPSS statistics 23. The study found a positive effect of value chain financing through trade payables on the financial performance of agricultural and manufacturing firms listed at the NSE and a negative influence of funding through retained earnings, trade receivables, and bank borrowings. In addition, firm size also impacted firm performance positively. Therefore, owners and managers of agricultural and manufacturing firms should buy on credit, make cash sales, pay dividends, avoid bank borrowing, and expand their asset base to maximize firm performance. The study concluded by suggesting further research to uncover other VCF options not covered in this work that may influence the performance of listed agricultural and manufacturing organizations.