Moderating Role of Firm size on the relationship between Micro Factors and Financial Performance of Manufacturing Firms in Kenya
Abstract
The assessment and projections of economic growth of Kenya is pegged on the increase in the contribution of the manufacturing sector to the economy. However, this has not been achieved despite prominence in the government development blueprints such as Vision 2030. In reality, the performance and contribution of the Kenyan manufacturing firms to the economy has been worrying especially in the wake of realizations that other sectors of the economy such as real estate and telecommunications have surpassed it on the contribution to the GDP. In Kenya, Manufacturing share of total Kenyan economic output has stagnated at 10 with a declining contribution to total wage employment. It is this fact that necessitated an enquiry on the role of micro factors on the financial performance of manufacturing firms in Kenya. The specific objective was to determine effect of operations practices and firm financial performance, and to establish the moderating effect of firm size on micro factors on firm's financial performance. The macro economic factors included operational practices, production capacity, management practices. Agency theory is used as the foundational theory, with enforcements from wealth maximization theory and the resources based theory. The research design was descriptive research design. Data was collected using a self-administered questionnaire, from a population of 180 manufacturing firms in Kenya. The response rate was 95%. Descriptive statistics, correlation and regression techniques were used to analyze the data. The results of the study show a statistically positive and significant direct relationship between micro factors on firm financial performance. The results show that relationship between micro factors and firm financial performance is moderated by firm size. It was further established that firm size and firm financial performance were positively and significantly related. The study further concluded that there is a positive relationship between the moderating effect on micro factors and manufacturing firms’ financial performance. The study recommends and firm size moderates the relationship between micro factors and financial performance of manufacturing firms in Kenya.
Keywords: Firm size, Micro Factors, Financial Performance, Manufacturing Firms, Kenya
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