Effect of Production Capacity on the Financial Performance of Manufacturing Firms in Kenya
Keywords:
production capacity, financial performance, manufacturing firms, KenyaAbstract
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 objectives were; examine the relationship between production capacity and firm financial performance. Wealth Maximization Theory and the resources based theory were used. 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. Production capacity was found to be satisfactory variables in explaining financial performance of manufacturing firms in Kenya. The results indicate that the model was statistically significant. The results imply that production capacity, are good predictors of financial performance in manufacturing firms. The study concluded that there is a positive relationship between production capacity and manufacturing firms' financial performance. The study recommends capacity building through training to improve manufacturing firms' financial performance.
Keywords: production capacity, financial performance, manufacturing firms, Kenya
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