Financial Structure and Financial Performance of State Corporations in Kenya

Abstract

The primary objective of financial management in state companies is to effectively manage the limited resources available to produce outcomes that meet the demands of the communities that benefit from them. This study investigated the financial structure and financial performance of state-owned corporations in Kenya. Particularly, the research analyzed the financial structure and financial performance of 15 non-commercial state enterprises, as well as their financial accomplishments and current difficulties. A few state policies that influence the performance of Kenyan businesses were also evaluated by the research, and pertinent policy suggestions were made to improve the financial structure of Kenyan corporate institutions. Study findings shall bridge gaps, descriptive research was employed to help collect data that answered questions about the current state of the study. Similarly, the study’s sample was 15 parastatals of non-commercial state corporations in Nairobi. The research utilized a random sampling technique to ensure fair representation. Secondary data were gathered to explore the financial structure and institutional performance of state corporations. SPSS was applied for data analysis, involving tabulations, mean, percentage, variance and correlation to discern connections. Additionally, econometric models and statistical analysis are employed to analyze and synthesize the research data comprehensively. The relationship between capital adequacy and financial performance was established to be positive but not statistically significant. In the second variable of the study which was meant to determine the effects of liquidity management on performance, results identified that the current ratio, a measure of liquidity, had a negative but insignificant relationship with ROA. This implies that liquidity levels do not have a substantial impact on the financial performance of state corporations. Likely in the third variable of the study, the coefficient for management efficiency was positive, indicating a potential beneficial impact on financial performance, but this relationship was also not statistically significant. Additionally, the analysis revealed a positive but insignificant relationship between gross domestic product growth and financial performance, this suggests that while broader economic conditions do influence corporate performance, their direct impact on the financial performance of state corporations is not significant. The study thus, recommends the government, policy makers and managerial players to step up in the management of capital adequacy, liquidity management, management efficiency and gross domestic product to promote organizational performance. And they should focus on building structures that would enable organizations to thrive. The study has established additional literature to support future studies in bridging further existing gaps.