The Effect of Firm Characteristics on the Financial Performance of Savings and Credit Cooperative Societies in Murang’a County

Abstract

SACCOs play an increasingly important role in Kenya’s financial sector, serving a growing number of both urban and rural poor households. There are numerous essential firm characteristics that vary systematically across firms. Past research literature has shown how pecuniary firm characteristics, such as assets, age, diversification, capital, leverage, board composition, institutional shareholding, profitability, liquidity, growth and economic environmental variables make an impact on the SACCOs’ financial monetary performance and progress. These features are certainly evaluated by assessing obtainable data on SACCOs and other financial sector firms (Kaguri 2013). The objective of the study was to evaluate the effect of firm characteristics on the financial performance of SACCOs in Murang’a County. The research employed an explanatory research design incorporating data collected for the period 2011 to 2015 for sampled 36 SACCOs registered with the Ministry of Cooperatives in Murang’a County. The study utilized secondary data. Multiple regression analysis was adopted to explore the effect of firm characteristics on the financial performance of SACCOs in Murang’a County. The study results indicated that there was a positive connection between liquidity and capital adequacy and financial performance of SACCOs in Murang’a County. The study also concluded that management efficiency and asset quality related negatively with financial performance of SACCOs in Murang’a County as shown by the correlation coefficients. The study recommends that SACCOs need to improve their management efficiency in as far as cost management is concerned to increase their financial performance. Further, the SACCO regulator is recommended to stringently verify compliance and adherence to set guidelines is observed by the SACCOs. Additionally, The regulator should expand its regulatory scope to all SACCOs. This will enhance uniformity of applicability of firm characteristics in the SACCO subsector