FINANCIAL MANAGEMENT PRACTICES AND PERFORMANCE OF SUGAR FIRMS IN WESTERN KENYA

Abstract

This study examined the influence of financial management practices on performance of sugar manufacturing firms in Western Kenya. The study was informed by Modern Portfolio theory, budget theory and trade off theory of capital structure. The study was employed descriptive survey research design. The study targeted 95 respondents from five sugar manufacturing firms in Western Kenya which formed unit of analysis. The companies were Mumias Sugar Company, Nzoia Sugar Company, West Kenya Sugar Company, Butali Sugar Mills and Busia Sugar Company. The sampling frame for this study comprised of finance managers, Operation Managers, Heads of Accounts, Investment managers and Budget/Finance Officers of the five sugar manufacturing companies in Western Kenya. Since the population was fairly small-below 100 (95), a census method was employed to avoid sampling bias when the study population is small. The data collection instrument was mainly questionnaire which was carefully designed to cover relevant headings or themes of the study. Pilot study was done in one of the sugar firms in Nyanza Region. Content validity was used to test instrument validity while cronbach’s alpha coefficient was used to test instrument reliability. Descriptive analysis such as frequencies, means, and standard deviation was utilized whereas analyzed data presented in tables and graphs, while inferential statistics assessed nature and the strength of the relationships. SPSS version 28 is the computer-based analysis software that was used to compute statistical data. The study established that financing decision, capital budgeting, working capital and investment appraisal had significant positive influence on performance of sugar manufacturing firms in Western Kenya. This implies that improvement in utilization would enhance performance of sugar manufacturing firms in Western Kenya. The study concluded that that financial management practices have significant influence on performance of sugar manufacturing firms in Western Kenya. The study therefore recommended that sugar manufacturing firms in Western Kenya prioritize equity financing for long-term stability and growth, sugar manufacturing firms in Western Kenya continue to prioritize rigorous capital budgeting practices and sugar manufacturing firms in Western Kenya should continue to employ robust investment appraisal techniques to assess potential projects. Key Words: Financing Decisions, Budgeting, Working Capital, Investment Appraisal CITATION: Githinji, L. W., Miroga, J., & Otinga, H. (2024). Financial management practices and performance of sugar firms in Western Kenya. The Strategic Journal of Business & Change Management , 11 (2), 829 – 847. http://dx.doi.org/10.61426/sjbcm.v11i2.2953