MDF Theses and Dissertations (2020)

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Influence of capital structure adjustment in mergers and acquisitions on acquirers’ financial performance in Kenya
(Strathmore University, 2020-06) Ochieng', Bob Marshell
Capital structure is an important aspect in corporate finance since the profitability and the long term existence of the firm is affected by such decisions. Capital structure is expected to change after corporate restructuring such as Mergers and Acquisitions. Existing corporate structure literature has linked capital structure decisions and financial performance of firms. The aim of the study was to find the effect of corporate structure adjustment as measured by Leverage change and adjustment in leverage deficit on the financial performance of acquirers’ listed in Kenya. Financial performance is measured by Return on Equity, return on Asset and Tobin’s Q. The use of Tobin’s Q as an additional measure of financial performance adds to the different ways that previous studies have used to measure financial performance. Financial performance is expected to improve when the deficit between target leverage and Actual leverage is bridged. Similarly, an acquirer’s debt capacity is expected to increase after a merger and this increase in debt capacity is expected to influence the financial performance after the merger. A two-stage panel least squares regression were performed to establish the relationship between capital structure adjustment and financial performance. The study focused on mergers and acquisitions that were completed between 2007 and 2013. Analysis was carried out in the pre-merger period and 5 years’ post-merger period. The findings show that both Adjustment in Leverage Deficit (ALD) and Leverage Change (LC) have a significant influence on the three measures of financial performance: ROA, ROE and Tobin’s Q. The study found that ALD had a positive significant influence on acquirers’ financial performance. Similarly, LC had a positive significant influence on acquirers’ financial performance. The study should be of interest to corporate finance managers because the findings show that managers who are intentional about their capital structure adjustment during mergers and acquisitions have their financial performance significantly improved. The study however, had a number of limitations; there are limited number of non-financial acquirers’ listed in Kenya. Secondly, The Kenyan data on mergers and acquisition is also not readily available making it difficult to know some aspects of the deal characteristics such as cash payment or equity.
Influence of digital lending platforms design on loan performance among small business owners in Gikomba open-market, Nairobi County
(Strathmore University, 2020-12) Zeituna, Mustafa
Access to loans is instrumental in deepening financial inclusion and supporting small business growth. With the increasing digitization in the Kenyan economy, many digital lenders' availability has been integral in financial inclusion. The penetration of digital loans in the country is seen as a sign of a healthy market. However, determining the loan's quality to the loanee is yet to be determined since the loans are processed instantly. This study sought to establish the effect of digital lending platforms design on loan performance among small business owners in the Gikomba Open air market. The study specifically examined the effect of instantaneous processing, service automation, and remote processing on loan performance. The study further sought to establish the moderating effect of demographic factors on the relationship between digital lending platforms design and loan performance. The research was grounded on the financial inclusion and fmancial intermediation theories. The study adopted a positivism research philosophy that relied on descriptive research design to determine the association among the variables. The target population of the study was the registered small-scale business owners operating within Gikomba Open-Air Market. A pretest was carried out on the same population on a smaller sample before embarking. The study relied on primary research data collected using a structured questionnaire, with analysis involving descriptive and inferential statistics. The research further applied a partial correlation to examine the moderating effect of demographic factors. This study presented the findings using various graphical representation tools such as charts and tables. The results indicated a positive correlation between instantaneous processing, service automation, remote processing, and loan performance. This implied that the lending platforms' design had enabled borrowers to access multiple lenders, improve their repayment time, and are less likely to default on their loans than when accessing conventional loans. The study concludes that digital lending platform design had a positive and significant relationship with loan performance. The partial correlation results indicate that age, gender, education, and income level significantly moderated the relationship between digital lending platforms design and loan performance. The study recommends that digital lenders should be regulated to adopt the protection of consumers of their products. Further, lenders need to invest in newer technologies that will foster instantaneous processing, improving the accessibility of funds, and increased automation in customer service as this can enhance their client engagement. To lenders, recommendations were for additional emphasis to be made on payment to reduce the default rate. Lenders were also advised to ensure that the borrower's demographic profile is taken into account in loan screening to ensure different limits for different demographics.
An examination of the drivers of uptake of microcredit services by customers: the case of South Sudan Microfinance
(Strathmore University, 2020) Manyuon, Daniel Athior Atem
The study examined utilization of microcredit from South Sudan Microfinance institution at the group and individual levels to minimize poverty in South Sudan. This has been intended to determine the effects and what drives various persons to seek for microcredit. In so doing, three main objectives were used which included to examine; the levels of uptake and effect of microcredit on the households’ income and savings; the drivers for the uptake of microcredit and assess interventions of South Sudan Microfinance Institution (SUM) and Government of South Sudan in enhancing the uptake of microcredit as main stakeholders. Financial intermediary and stakeholders’ theories were used together with a pragmatic approach to underpin the study. Therefore, qualitative and quantitative methods were used to collect the data from this descriptive case study with a sample size of 400 participants. These methods included interviewing and administering questionnaires. Qualitative data were descriptively analyzed to suit the themes under the study objectives. Quantitative data were coded and entered the Scientific Package for the Social Scientists (SPSS). The analysis was done by the t-test to establish the differences in minimizing poverty among groups and individual borrowers. ANOVA was also used to analyze the drivers and the extent to which stakeholders’ approaches have been essential to the borrowers. The mean results indicate a high difference in effects among the group borrowers in comparison to an individual. The findings also show that the household drivers are significant differences but institutional drivers remain significant to all borrowers. It is also indicated that drivers used like grace period and interest rates are friendly to most poor women. The study concludes by recognizing efforts made by SUM for having been one of the best intermediaries between the people and commercial banks so that those outside the criteria of such financial institutions can also access microcredit. Upon this, the study recommends continued working with the government so that it can establish more branches in rural areas to enable poor people to access credits and employ the citizens.
The influence of business group factors on the financial performance of informal micro retail enterprises in Nairobi, Kenya
(Strathmore University, 2020) Wanjiku, Caroline Grace
The study focused on the informal micro retail sector in Nairobi researching on the enterprises in the Smart Duka project run by a Non-Governmental Organization. The study offered novelty by focusing on the most marginalized of micro enterprises in informal settlements in Nairobi while considering the effect of business groups and magnitude effect of group factors on financial performance of micro enterprises. Prior studies have focused more on areas outside the informal sectors of Nairobi and have had limited focus on the effect of group participation on financial performance of enterprises which the current study sought to address. In the project, various formal practices are used, which include training, merchandizing, book keeping, coaching, use of technology and innovation, inventory management, joint supply sourcing, loan accessibility and group associations which were considered under three main factors in the study; financial, managerial and strategic fit factors. The factors were also supported by various studies in literature review and the study motivated by research gaps in prior studies and the economic importance that the informal micro enterprise sector holds. The theories related to this study were the resource-based view theory and the social exchange theory. The study was based on an experimental research design with an explanatory purpose to explain the causal relationship between business group factors and financial performance of the enterprises and used primary and secondary data. Diagnostics, descriptive and inferential analysis using non- parametric tests were done which included correlation and ordinal regression. The financial performance and business factors of the enterprises that joined groups (treated group) were compared to financial performance and business factors of the enterprises that did not join groups (control group) in the project. Based on the results of the study, the null hypothesis of the study which stated that financial performance of enterprises in business groups (treated group) is less or equal to that of enterprises not in business groups (control group) was accepted due to the difference between the treated and control groups being statistically insignificant. However, the treated group financial performance was higher and hence ways of making this difference significant should be addressed. The managerial factors had positive insignificant effects; strategic fit factors had positive significant effects while financial factors had negative insignificant effects on financial performance of the enterprises.
Factors influencing intent of uptake of retirement pension and provident scheme plans in the informal sector in Nairobi County
(Strathmore University, 2020-06) Ngomba, Paul Kitheka;
When it comes to social security at retirement, the formal sector has constantly received more attention compared to the informal sector. Formal coverage stands at only twenty per cent in Kenya. The rather vibrant but fragmented Kenyan informal sector has resulted in static economic growth despite its potential as a key contributor. The 2018 Economic Survey by the Kenya National Bureau of Statistics (KNBS) shows that the Jua Kali Sector accounted for approximately eighty-three per cent of country’s total labour force and created over seven hundred and eighty-seven thousand new jobs in the period. The Jua kali sector however remains excluded, unregulated or largely underrated. Majority of the elderly in this sector have been left out of structured pension plans exposing them to poverty, health and other risks once they can no longer provide for their livelihood. The objective of this study was to determine the factors influencing intent of uptake of retirement pension and provident scheme plans in the informal sector in Nairobi County. The specific objectives were to determine the influence of the level of income, the level of education, the association links and age on uptake of retirement pension and provident scheme plans in the informal sector in Nairobi County. The study used a descriptive research design and the population was twelve million informal sector workers. The sample size employed was three hundred and eighty-four respondents and stratified random sampling was the sampling technique. Data was collected through structured questionnaires with the data subsequently being analyzed through a multiple regression model and correlation analysis. On the factor analysis it was noted that the factors explained approximately sixty five percent of the total variation based on the rotated loadings. The findings indicated that there was a positive correlation between age and intent to uptake pension and provident scheme plans. There was a strong positive correlation between association link and intent to uptake pension and provident scheme plans. There was a positive correlation between education level and their intent to uptake pension and provident scheme plans. There was a positive correlation between income level and intent to uptake pension and provident scheme plans. It was concluded that individual willingness to save in pensions plans increased with increase on age. Majority of the individuals working in informal sector considered membership in an informal sector association to be of importance. Provision of financial management education is key to ensuring that the informal sector workers invest in pension schemes and lack of sufficient earnings crippled their wish. It was recommended that irrespective of the age, NSSF and RBA should come up with sensitization strategies that ensure that employees of all age groups working within the informal sector are thoroughly educated on the importance of partaking in retirement benefits schemes. Government must come up with strategies that protect these informal sectors; which include measures such as tax reliefs, incubation programs and credit support programs, all with an aim of ensuring reliable income flows.

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