Effect of financing choices on financial performance of new vehicle dealers in Kenya
Date
2022
Authors
Agani, Sylvia
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The financial performance of firms is dependent on numerous financial decisions chief among them the availability of financing options and the efficiency and effectiveness with which the management is also to utilize these resources. Many small businesses in Kenya have continued to experience failure due to stringent financing options that put their operations at risk making their continued survival untenable. Hence, the current study aimed at examining the effect of financing options on financial performance of new motor vehicle dealers in Kenya. The specific objectives of the study were to examine the effect of equity financing, lease financing, purchase order financing and cheque discounting financing on financial performance of new vehicle dealers in Kenya. The study was anchored on pecking order theory, information asymmetry, credit rationing and financial intermediation theory. The study applied correlation research design and sourced for secondary data from 2011 to 2021 among nine new vehicle dealers in Kenya. The study applied descriptive and inferential statistics. Fixed effects regression model was fitted. Results of the study indicates that equity financing, lease financing, purchase order financing and cheque discounting financing have positive and significant effect on financial performance of new vehicle dealers in Kenya. Based on the findings it can be that there is need for consideration of mixed financing choices. Such as lease financing options provides favourable terms among business enterprises due to flexibility and efficiency it leads to in business enterprises. It can be recommended that new vehicle dealers to develop strategic partnership with venture capitalists and business angels to ease their customers access to equity finance. Secondly, new vehicle dealers in Kenya indicates the need for adoption of customized model for lease vehicle financing. Thirdly, purchase order financing being complementary approach between financial institutions calls for development of strategic partnership that would maximize odds of wealth maximization principle. Further, positive significant effect of cheque discounting on financial performance of new vehicle dealers calls for enhancement of respective organization working capital management model to enhance achievement of profit maximization principle.
Description
A Thesis submitted in partial fulfillment of the requirements for the award of the Degree of Masters of Business Administration at Strathmore University Business School
Keywords
Financing choices, Financial performance, Vehicle dealers