Influence of Financial Management Practice on Financial Performance of Sugar Manufacturing Companies in Kenya

Abstract

The objective of this study was to establish the influence of financial management practice on financial performance of manufacturing companies using evidence from Kenya’s sugar industry. The following specific objectives were addressed by this study: to determine the investing practices on the financial performance of sugar manufacturing companies, to assess the influence of capital structure practices on financial performance of sugar manufacturing firms in Kenya, to evaluate the influence of liquidity practices on financial performance of sugar manufacturing companies in Kenya and to determine the influence of Board structure as a moderating factor on the financial performance of sugar manufacturing companies in Kenya. This study was guided by Liquidity Preference model, Modigliani and Miller Capital structure Model and agency theory. Most researches have concentrated mainly on single financial management decision on the financial performance of organizations. On this premise there existed a knowledge gap on the collective strategic financial management practices practiced by sugar industry and financial performance of sugar manufacturing industry, hence the need for this study. This research adopted a descriptive research design in which a census of all the targeted population of 12 manufacturing companies jointly from sugar manufacturing industry were drawn from a list of 800 manufacturing companies in Kenya, whereby a proportionate random sample of 109 employees were interviewed from all the 12 sugar manufacturing companies in Kenya. Questionnaires were administered as the main tool of data collection whereby 102 questionnaires were collected representing a 93.6% response rate. Descriptive statistical methods were applied to describe application of strategic financial management practices in the sampled manufacturing companies which were sugar manufacturing companies. Inferential statistical techniques such as Correlation analysis and regression analysis were applied to test the hypotheses of association and differences. Collected data was processed using the Statistical Package for Social Science (SPSS) which was the main computer software that was utilized in data analysis. The strategic capital practices’ null hypotheses were rejected implying a significant effect on financial performance. Strategic liquidity practices were significant hence the null hypothesis was rejected. Strategic investing practices had coefficients of estimate which were significant implying that the null hypothesis was rejected. Board structure was found significant implying board structure as a moderating value has a significant influence on financial performance. It is therefore recommended that it is important for firms to retain their profits so that they can reinvest and gain higher returns on investments and shareholder equity furthermore Organizations need to utilize computers in cash management since they are efficient and effective. This study suggests the need for further research on other economic factors besides financial management practices that influence the financial performance of sugar manufacturing companies and other companies.