Financial management practices on financial performance of registered micro and small enterprises in Nairobi City County, Kenya

Main Article Content

Mercy Wathimu Kinyua John Njangiru Mungai, PhD

Abstract

Micro and Small Enterprises (MSEs) have a huge responsibility of promoting economic development of many nations in the world today. Studies from developed nations find financial management practices to contribute immensely to MSEs’ poor business performance. This study establishes the relationship between financial management practices and financial performance of MSEs. Literature suggests that most research on the financial performance of MSEs is based on any one or a combination of the following key theories and frameworks: the Modern Portfolio Theory, the Signalling Model, and the Pecking Order Theory. A cross-sectional descriptive survey research study design was used. The target population of the study was 56, 055 MSEs. The researcher used simple random sampling to arrive at a sample size of 384 licensed MSEs of the total population with at least one respondent in each. Multivariate regression model showed that firms’ overall financial performance was positively affected by the FMPs. The findings specifically showed that capital budgeting and capital structure management practices each had a significant positive effect on the company’s financial performance with WCM practices being the least contributor to the effect. The study found out that WCM is a leading financial management practice among MSEs has a significant negative influence on their financial performance. It is recommended that management of MSEs should put in place the most appropriate financial management practices to help them improve their return on assets.

Article Details

How to Cite
Kinyua, M., & Mungai, J. (2018, November 24). Financial management practices on financial performance of registered micro and small enterprises in Nairobi City County, Kenya. Researchacies International Journal of Business and Management Studies, 2(2), 71-94. Retrieved from https://researchacies.org/journal/index.php/RIJBMS/article/view/28
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Articles
Author Biographies

Mercy Wathimu Kinyua, Kenyatta University

Student

John Njangiru Mungai, PhD, Kenyatta University

Lecturer