Faculty of Business Studies

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APPLICATION OF ASYMMETRIC-GARCH TYPE MODELS TO THE KENYAN EXCHANGE RATE AND BALANCE OF PAYMENTS OF TIME SERIES DATA
(Chuka University, 2022-09) NDEGE, ERIC
The critical concern of financial market investors is uncertainty of the returns. The symmetric-GARCH type models can capture volatility and leptokurtosis. However, they do not capture leverage effects, volatility clustering, and the thick tail nature of financial time series. The primary objective of this study was to apply the asymmetric-GARCH type models to Kenyan exchange and balance of payments of time series data to overcome the shortcomings of symmetric-GARCH type models. Secondary objectives included fitting asymmetric-GARCH type models to the Kenyan exchange rate and Balance of payments data, identifying the best asymmetric-GARCH type model(s) that best fit(s) the Kenyan exchange rate and Balance of payments data and forecasting the Kenyan exchange rate and Balance of payments data trends using the best asymmetric-GARCH type model. The study compared five asymmetric Conditional Heteroskedasticity class of models: IGARCH, TGARCH, APARCH, GJR-GARCH, and EGARCH. Monthly secondary data on the exchange rate from January 1993 to June 2021 and Balance of payments from August 1998 to June 2021 were obtained from the Central Bank of Kenya website. Asymmetric GARCH models were fitted to the stationary log-differenced data based on the functions in the RUGARCH package in R. The best fit model is determined based on minimum value of Akaike Information Criterion (AIC), Bayesian Information Criterion (BIC). The optimal variance equation for the exchange rates data was APARCH (1,1) - ARMA (3,0) model with a skewed normal distribution (AIC = -4.6871, BIC = -4.5860) since it accounts for leverage and the Taylor effect. The optimal variance equation for the Balance of payment data was ARMA (1,1) - IGARCH (1,1) model with a skewed normal distribution (AIC = -0.14475, BIC = -0.07882) due to absence of (persistent) volatility clustering in the series. Volatility clustering was present in exchange rate data. Both series did not show evidence of leverage effect. Estimated Kenya’s exchange rate volatility narrows over time, indicating sustained exchange rate stability. While the balance of payment volatility has narrowed over time, the balance of payment deficit keeps widening. Thus, the government should take measures to ensure that it maintains it competitiveness in the global market to attract foreign direct investment and promote exports of goods and services.
BCOM 213: INTERMEDIATE ACCOUNTING II
(Chuka University, 2023-04-11) Chuka university
BCOM 262: BUSINESS STATISTICS
(Chuka University, 2023-04-11) Chuka University
BCOM 263: OPERATIONS RESEARCH I
(Chuka University, 2023-04-11) Chuka University
Digital micro credit, age and gender on financial inclusion of small-scale traders in Chuka township, Tharaka Nithi county, Kenya.
(Chuka University, 2025) Odira, David Otieno
The motivation for the research stemmed from the recognition that while digital microcredit is widely promoted as a tool for poverty reduction and economic empowerment, its actual impact on financial inclusion remains uncertain. This study examined the relationship among Digital Micro Credit, age and gender on the Financial Inclusion of small-scale traders in Chuka township, Tharaka Nithi County. Understanding this relationship is critical for designing financial systems that support marginalized groups and foster equitable economic participation. The study was guided by the Theory of Financial Innovation and the Technology Acceptance Theory. A descriptive cross-sectional research design was adopted, targeting a population of 2,374 small-scale traders in Chuka Township. Using stratified and simple random sampling procedures, a sample of 182 traders was determined through Cochran’s formula. Data were collected using structured questionnaires, whose content validity was confirmed through expert review, while reliability was established using Cronbach’s Alpha, yielding an overall coefficient of 0.757, which was within acceptable thresholds. A pilot test involving 18 traders was carried out in Chogoria market to refine the instrument. Both descriptive and inferential statistical techniques were employed. Descriptive results revealed that a majority (54.7%) of respondents were female, while most traders (61.3%) were aged between 26–45 years. The average duration in business was 6–10 years, indicating considerable trading experience. Most respondents (68.5%) reported frequent use of digital loan platforms such as M-Shwari and KCB-MPesa, mainly for business restocking and emergency needs. Inferential analysis using Ordinary Least Squares (OLS) regression showed that digital microcredit alone had a positive but statistically insignificant effect on financial inclusion (β = 0.112, p > 0.05), leading to the retention of the null hypothesis (H01). However, age significantly moderated this relationship (β = 0.214, p < 0.05), with middle-aged traders (36–55 years) showing higher inclusion levels than younger groups. Similarly, gender significantly moderated the relationship (β = 0.198, p < 0.05), indicating that male traders benefitted more from digital microcredit services compared to female counterparts. The combined moderating effects of age and gender were statistically significant (R² = 0.063, F = 3.98, p < 0.05), confirming that demographic factors jointly shape financial inclusion outcomes. The study concludes that expanding digital microcredit access is necessary but insufficient as a stand-alone driver of financial inclusion. Theoretically, the study contributes to the literature by showing that digital innovations alone do not automatically close inclusion gaps, as their effectiveness depends on user characteristics and contextual factors. Practically, the findings highlight the importance of tailoring financial products to demographic realities while strengthening supporting services. Future research should investigate additional determinants of financial inclusion, adopt mixed-methods approaches, and assess long-term impacts of digital microcredit across diverse settings.
Effect of corporate board structure on the value of financial firms listed at the Nairobi securities exchange, Kenya
(Chuka University, 2025-11-10) Njoka, Eva Gatune
As global best practices continue to emphasize the importance of sound governance, there is a growing need to understand how the structure of corporate boards affects the value of financial firms in the Kenyan context. This study sought to explore the relationship between board structure and firm value among financial firms listed on the NSE. The specific objectives of this study were to establish the effect of board size, board independence and board remuneration on the value of financial firms listed at NSE and to evaluate the moderating effect of firm size on the relationship between board structure and the value of financial firms listed at NSE. This study was based on Agency Theory, Stakeholders’ Theory and Stewardship Theory. A descriptive cross-sectional research design was adopted. A census technique was conducted to collect data from all the 22 listed financial firms for a 5 year period from 2020 to 2024. The study relied only on secondary data, collected from the annual financial reports of the financial firms. Data was analyzed using descriptive and inferential statistics. Microsoft Excel and SPSS version 28.0 were used to code and analyze the raw data collected. Diagnostic tests were carried out to test the regression assumption. Multiple regression analysis was used to establish the relationship between variables, and t-statistic at 5% significance level was employed to test the hypotheses. The findings of the study revealed that board size (B = 0.002, P=0.602>0.05) and board independence (B = -0.002, P=0.647>0.05) have no statistically significant effect on firm value, as their p-values are well above the 0.05 threshold. This suggested that simply increasing the number of board members or having more independent directors does not necessarily translate into higher firm value. However, board remuneration (B =0.073, P=0.000<0.05) was positive and highly significant, meaning that compensating directors adequately had a strong and positive influence on firm value. This implied that rewarding board members aligns their interests with those of shareholders, motivating them to commit more effort, skills, and oversight to enhance firm performance. The results suggest that in firms listed at the NSE, the financial incentives provided to board members are more impactful in driving firm value compared to board size or independence. This could be explained by the idea that remuneration serves as a tangible motivator, encouraging directors to act diligently in advancing firm goals, whereas board size and independence may not automatically translate into effective governance unless coupled with accountability mechanisms. The study recommended that Regulators should also avoid rigid prescriptions on board size and instead encourage firms to adopt sizes that best match their operational complexity and strategic needs. The study findings are expected to add to the academic field by laying a foundation for further research on board structure and firm’s value. The study is expected to benefit regulators and policymakers, such as the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK), by highlighting areas that require stronger governance frameworks to enhance market stability and investor confidence.
EFFECT OF EXTENDED MARKETING MIX ELEMENTS ON THE PERFORMANCE OF PRIVATE CHARTERED UNIVERSITIES IN NAIROBI CITY COUNTY, KENYA
(Chuka University, 2022-09) Mbuba, Enid
A comprehensive plan specifically created for attaining a firm's objectives is known as a marketing mix strategy. It offers a strategy for achieving marketing goals. Private Universities are facing competition from public universities, Tertiary institutions which includes National and Local polytechnics under government sponsorship. This competition has resulted to low enrolment and decreased graduates in some Private Universities. Private Universities being purely in a service industry apply extended marketing mix elements such as processes, people and physical evidence to increase their student enrolment. The general objective of the study was to investigate the effect of extended marketing mix elements on the performance of private universities in Nairobi City County, Kenya. The specific objectives of the study were to determine the effect of processes, people and physical evidence on the performance of private universities in Nairobi City County, Kenya. The study was anchored on marketing mix model, consumer/customer behavior model and resource based theory. The study adopted a descriptive research design. The target population of the study was 1867 respondents comprising of academic and administrative staff from 9 chartered private Universities in Nairobi City County, out of which a sample of 330 was selected. Questionnaire was the main instrument of data collection. Simple and Multiple Linear Regression analysis was done with aid of statistical packages for social sciences (SPSS) version 25.0 to assess the relationship between variables. F-statistics, Correlation analysis and 𝑅2 were used for testing hypothesis. Results are presented using descriptive and inferential statistics. Diagnostic tests such as Multicollinearity, Heteroscedasticity and Normality tests were carried out. From the study there was significant effect of process on performance according to administrative staff with a regression coefficient of 0.556, p-value 0.000<0.05). Further, there was significant effect of people on performance according to academic and administrative staff regression coefficient of 0.456 and 0.833 respectively with P-value of 0.000<0.05. Finally, there was significant effect of physical evidence on performance according to academic and administrative staff regression coefficient of 0.218 and 0.932 respectively with P-value of 0.032 and 0.000 <0.05.) The study concluded that process, people and physical evidence had a significant effect on performance of private universities in Kenya. The study recommends that private universities should develop and implement extended marketing mix elements that enhance processes, engage, people who are qualified and maintain appropriate physical facilities to ensure increased performance. The findings are useful to universities to help them in designing effective extended marketing mix strategies that boost performance. The study findings also contribute to theory on extended marketing mix elements and performance in private chartered universities in Nairobi City County.
Effect of external debt on inflation and investment in kenya
(Chuka University, 2024) Kagotho Francis Gichia
Many developing countries require external debt to bridge the gap in government’s expenditure budget. In Kenya, the government has over time accumulated large stocks of external debt to facilitate the provision of the essential public services and promote infrastructural development. Kenya’s external debt has been increasing, recorded at approximately 45.5 billion U.S. dollars as at 2023. Despite the increased external borrowing in Kenya, public investment target of 10 per cent of gross domestic product and private investment target of 24 per cent of gross domestic product towards fulfillment of vision 2030 has not yet been achieved. The inflation rate has also increased over time, beyond the set threshold of 5 per cent. This study focused on the effect of external debt on inflation and investment in Kenya. The specific objectives of this study included; to investigate the effect of external debt on public investment in Kenya, to determine the effect of external debt on private investment in Kenya and to investigate the effect of external debt on inflation in Kenya. The relationship between external debt and investment (private and public) was based on Debt Overhang Theory augmented with Accelerator Theory whereas non-Ricardian Theory of Public Debt was the foundation of the relationship between external debt and inflation. A causal research design was utilized to examine the relationship among the study variables. Yearly time series data on the mentioned variables for the years 1990 to 2022 was collected using the structured data collection checklist from Kenya National Bureau of Statistics and World Bank. The research utilized the Autoregressive Distributed Lag Model. Stata software was used for data analysis. Diagnostic tests were conducted to ascertain that linear regression assumptions are adhered to. To test for the Stationarity of data, Augmented Dickey-Fuller test was used where interest rate, GDP growth rate, exchange rate and the dummy variable were stationary at level whereas private investment, money supply, tax, public investment, external debt and inflation were stationary at first difference. The long-run coefficient of external debt (0.1423) in model 1 was positive and significant, implying that 1 percentage increase in external debt would lead to a rise in public investment by 0.1423 per cent. The long-run coefficient of external debt (-0.0891) in model 2 was negative and significant, implying that an increase in external debt by 1 per cent would decrease the private investment by 0.0891 per cent. Lastly, the coefficient of external debt (0.2063) in model 3 was positive and significant, implying that 1 percentage increase in external debt would increase inflation by 0.2063 per cent. The p-values of the corresponding coefficients were 0.040, 0.006 and 0.026 respectively. The models were good predictors of public investment, private investment and inflation with R2 values of 0.9682, 0.9890 and 0.9973 respectively. The study recommends a robust system of debt management and mechanism to regulate the acquisition and utilization of the borrowed funds towards the earmarked projects. The policy makers may use the study results to guide the government on how to sustainably acquire external debt while enhancing macroeconomic stability. The investors may also learn about the potential risk and benefits of investing in the country.
Effect of financial deepening on private investment in Kenya
(Chuka University, 2024-10) Chepkorir Brendah
Private investment remains an important sector in the growth of economy and sustainable development in Kenya. It is envisioned to create job opportunities, distribute income and alleviate poverty. The underperforming growth rate of private investments that is below the expected growth rate of 24% has been witnessed in the past years. Since 1980, the highest growth that has been achieved is 15.2% in 2014. It then declined to 12.96% in 2021, 13.34% and 13.40% in 2022 and 2023 respectively, which are much below the projected growth rate. Existing studies in Kenya lack substantial inquiry on the relationship between financial deepening and private investment and have dealt with them separately without linking the two in a dynamic framework. Additionally, most of those studies tend to rely on a limited set of indicators of financial deepening, while employing different methods for analysis that may not be appropriate for unbiased results. The current study intended to determine the effect of financial deepening on private investment. Gross Fixed Capital Formation for the general private sector measured private investment, a dependent variable. Further, financial deepening (independent variable) was proxied by Private sector credit broad money and bank deposits (savings). The study also included public investment real interest rates and GDP Per capita as control variables. Financial intermediation theory and financial liberalization theory are the theories that guided the study. A causal research design was adopted and data were obtained from KNBS and World Development Indicators websites. STATA software was used in the analysis of the collected data. ARDL model was employed and the ECM was estimated since there was cointegration. From the findings, Private sector credit, Broad money and Bank deposits were statistically significant with positive coefficients of 0.32, 0.39 and 0.49 respectively in the short run. An increase in 1 percent of private sector credit, Broad money and Bank deposits cause private investment to increase by 0.32, 0.39 and 0.49 percent respectively. The findings show that private sector credit has a positive effect, while broad money and bank deposits have negative effect on private investment in the long run. The three models were good predictors of private investment as shown by R-squared values of 0.96, 0.94 and 0.94 respectively. The study concluded that financial deepening is important for growth of private investment in Kenya. Therefore, Financial intermediation theory is applicable in Kenya. The study recommends policymakers to conceptualize the policies that aim at facilitating financial access and inclusion for the marginalized groups in remote and rural areas. Further, the government needs to support financial sector through enhancing the growth of microfinance institutions. This will facilitate the provision of credit and savings services to individuals earning low income and owning small businesses.
EFFECT OF FINANCIAL INNOVATIONS ADOPTION ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
(Chuka University, 2020-12) Muriuki, Paul Murithi
The search for explanation on the relationship between financial innovation adoption and financial performance continues to dominate finance literature. Empirical studies exploring the nature of the relationship between financial innovation and financial performance present inconsistent findings. The purpose of this study was to establish the effect of financial innovation adoption on financial performance of commercial banks in Kenya. The specific objectives were; to determine the effect of agency banking, online banking, mobile banking and credit card banking on financial performance (ROA) of commercial banks. In addition, the study sought to establish the moderating effect of bank size on the relationship between financial innovation and financial performance of commercial banks. The study employed census survey on the population of the 42 commercial banks as at December 2016. Secondary data on financial innovation indicators was collected using a checklist for the period 2011 to 2017. Data was analyzed using a multiple linear regression analysis model with aid of Statistical Packages for Social Sciences (SPSS) Version 23.0. T-test and F- test were used to test the significance of the regression coefficients and overall model respectively, at 5% level of significance. The assumptions of ordinary least squares method were tested and established not to have been violated. The findings of the study revealed statistically significant positive effect of mobile banking (β =1.923, p-value 0.001<0.05, online banking (β =1.818, p-value 0.006<0.05) and agency banking (β=1.137, p-value 0.006<0.05) on financial performance (ROA). However, credit card banking had no statistically significant effect on ROA (β = 0.374, P-value 0.113>0.05). Bank size had no significant statistical influence on the relationship between financial innovations and ROA (β =0.071, p-value 0.509>0.05). The study recommended enhanced investment and usage of mobile, online and agency banking by commercial banks as they enhanced efficiency in service delivery and provided additional streams of non funded incomes which improved the return on assets.
EFFECT OF FINANCIAL RISK ON SHAREHOLDERS' WEALTH OF COMMERCIAL BANKS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA
(Chuka University, 2021-11) MOGUSU MARGARET WANJIRU
Shareholders' wealth is among critical decisions in a firm because it has a bearing on overall investor perception and firm value. There has been concern about the declining value of shareholders' wealth among commercial banks listed at the Nairobi Security Exchange (NSE). Previous studies have linked financial risk to shareholders' wealth. The researchers, however, disagree on the magnitude and direction of the effect. The main objective of the research was to determine the effect of financial risk on shareholders' wealth of commercial banks listed at Nairobi Securities Exchange. The study's specific objectives were to establish the effect of credit risk, liquidity risk, foreign exchange risk, and interest risk on shareholders' wealth. Commercial banks were chosen since they are required by Capital Market Authority to disclose all their financial statements to the public. This study was anchored on Modigliani and Miller Theory, Capital Asset Pricing Model, Financial Distress Theory, and Modern Portfolio Theory. A descriptive research design was adopted. The target population of this study was eleven commercial banks that had been constantly listed at the Nairobi Securities Exchange from 2013 to 2019. A census was conducted to collect data from the eleven banks due to the small size of the population. Data was obtained from published financial statements of all the eleven commercial banks listed at the NSE and the Banking survey publications for seven years from 2013 to 2019. These banks were consistently listed for this period. A checklist was used to guide in collecting secondary data. Data was analyzed using descriptive and inferential statistics with the help of Microsoft Excel and SPSS version 25.0. Multiple regression analysis was used to establish the relationship between variables, and t-statistic at a 5% significance level was employed to test the hypothesis. The overall significance was tested using the F-test. The findings of the study were presented in the form of tables and equations. The study established that credit risk had a significant adverse effect on shareholders' wealth with a regression coefficient of -215.945 and a p-value of 0.039. Further, it was found that liquidity risk and foreign exchange risk had a negative and positive effect with a regression coefficient of -0.556 and 3.764 and p-values of 0.023 and 0.035, respectively. The interaction between operational efficiency and financial risk had a regression coefficient of -17.772 and a p-value of 0.003. The study concluded that credit risk, liquidity risk, and foreign exchange risk had a significant effect on shareholders wealth of Commercial banks listed at the NSE and recommended that Managers should come up with stringent policies of regulating loans, and they can also demand collateral before issuing loans to curb credit risk. Banks should come up with a strategy of holding more liquid assets than liabilities. Banks should come up with ways of diversifying their resources to minimize risk and maximize returns. Commercial banks should emphasize refining their operational efficiency to reduce financial risk and mprove shareholders' wealth. Operational efficiency was found to alter the relationship between financial risk and shareholders' wealth. This studywill be significant to the Central Bank of Kenya and the government while formulating banking policies and regulations and guiding banks in developing their specific policies of minimizing financial risk. It will also provide further knowledge in the field of Commercial banks' financial risks.
Effect of firm level financial characteristics on corporate leverage of manufacturing firms listed at the Nairobi securities exchange
(Chuka University, 2024) Mutegi Reuben Mutindi
Manufacturing firms often use debt in financing their day to day operations. However, what constitutes optimal debt level is a subject of debate among researchers. Prior studies often associate firm specific characteristics with firm leverage. Despite efforts to employ qualitative, quantitative and triangulation approaches in conceptualization of study variables, the available evidence is however not conclusive. It is in this context that the present study set out to establish the effect of firm level financial characteristics on corporate leverage of manufacturing firms listed at the NSE. Specifically, the study tested the effect of asset tangibility, firm growth and firm liquidity on corporate leverage of manufacturing firms listed at the NSE. To provide more insight on the context of the variables, the study considered trade-off theory, pecking order theory, agency-cost theory and the simple linear regression model. This study employed causal research design and longitudinal research design in an attempt to explain the cause-effect relationship between the variables for the years 2018-2022. Secondary data from published audited financial statements of the listed manufacturing firms at the NSE for a period of five years 2018-2022 was considered. A target population of 23 manufacturing firms listed at the NSE was employed. The research data was pooled over a five-year period across the 23 firms yielding 115 observations. The data was summarized in MS-Excel and later analyzed using Statistical Package for Social Sciences (SPSS) version 28. Analysis of data included descriptive and inferential statistics. Hypotheses were tested at 5% level of significance using t-statistics and p-values. Results of the analysis showed that asset tangibility negatively affects corporate leverage since firms that generate relatively high internal funds tend to avoid debt funding ( t = -3.66, p=0.000 <0.05). This is consistent with the pecking order theory that explains that the use of retained earnings to finance firm’s operations comes with the minimum possible cost and managers would prefer to choose retained earning first before debt and equity. Firm growth had a negative effect on corporate leverage ( t = -2.285, p=0.024 < 0.05). Firm liquidity was also observed to have a significant negative effect on corporate leverage ( t = -3.356, p= 0.023< 0.05). The slope to predict corporate leverage from firm level characteristics does not differ significantly between the levels of firm age t = ˗2.301, p= -0.130 ˂0.05). Results of joint analysis showed that asset tangibility and firm liquidity have a negative effect on corporate leverage whereas firm growth does not affect corporate leverage. The interaction between firm age and firm level financial characteristics was not significant ( t =0.983, p=0.328˃0.05). This implies that the effect of firm level financial characteristics on corporate leverage does not depend on the firm age. The outcome of the study will be of value to investors, managers and shareholders in making choices aimed at maximizing shareholders’ wealth and in enhancing firm value. The study is also significant to academicians in broadening their knowledge on the nexus between firm level financial characteristics and corporate leverage of manufacturing firms.
Effect of fiscal policy variables on private investment in Kenya
(Chuka University, 2024) Chege Cecilia Njeri
The tenacity of the country's entrepreneurs and the favorable climate has been credited with the rapid expansion of private sector activity in the Kenyan economy. New technology and increased private investment propel the country's economy toward full employment, where resources are best used and economic development is achieved. Investment levels should be over 32 percent of Gross domestic product, with state investment comprising above 9 percent of Gross domestic product and private investment being 24 percent of Gross domestic product, according to Vision 2030. This objective does not appear to be attainable at the current growth pace. Several studies have examined the nexus between fiscal policy variables and private investment. However, there are mixed findings across countries and regions. For instance, some studies find a positive relationship, others find an insignificant effect, while others find a negative relationship. The contrasting findings could be due to differences in methodology, measurement of variables or country specific differences. Kenya has a dynamic economy with unique characteristics. It is therefore necessary to conduct further study in the country using a robust methodology and recent data. This study contributes to the existing literature by providing an empirical investigation of the effect of fiscal policy variables on private investment in Kenya using data covering the period of 1980- 2022.The specific objectives were; development government expenditure, recurrent government expenditure and corporate tax effect on private investment in Kenya. The study's theoretical foundations included the Keynesian Approach (Crowding in and crowding out) model and the Neo-classical Approach Theory (Tobin’s Q 1969). To find the casual effect link between the variables, a casual study design was used. A sample of 42 years from the yearly series data was taken from the websites of the African Development Indicators, Kenya National Bureau of Statistics, and Kenya Revenue Authority for the years 1980 to 2022. The study employed the autoregressive distributed lag (ARDL) model and the ECM was estimated since there was cointegration. It was found that development government expenditure had a positive (1.3860) significant effect on private investment in the short run and a negative (-1.2120) insignificant effect on private investment in the Long run. This could have been attributed to by factors such as efficient resource allocation in the short run. Government spending on infrastructure, Social security, education, research and technology has a positive effect on private investment. There was a negative (-0.3631 and -2.7596) significant effect of recurrent government expenditure both in the short run and Long run respectively on private investment in Kenya. This implies that more government spending on recurring costs may increase the demand for borrowing by the government, which would raise interest rates hence, crowd-out private investments. The findings demonstrated that corporate tax had a significant negative (-0.3088) effect on the short run and positive (0.4161) effect on the Long run on private investment in Kenya. A rise in corporate taxes immediately raises a company's short-term investment costs. Higher taxes lower businesses' after-tax profits, which may deter them from expanding their operations or making new investments. In the long run, businesses might eventually modify their tactics to account for increased taxes. This entails streamlining their operations to lessen the effect of taxes on investment, maximizing their capital structure, or looking for tax breaks. According to the study, the government is recommended to allocate funding for development in a balanced manner that considers both the short-term and long-term benefits of stimulation. It suggests that the government implement changes to lower costs and improve the efficacy of ongoing expenditures. This means reducing bureaucracy, optimizing staffing levels, and streamlining the procurement process. In order to facilitate investment planning, a consistent corporation tax policy may be implemented by allocating revenue money to worthwhile endeavors that will increase private investment in Kenya. Future studies may be done targeting other variables as well as in other countries.
Effect of government’s human capital expenditure on poverty rates in Kenya
(Chuka University, 2025) Musee, Amos Mutambu
Poverty remains a significant socio-economic challenge in Kenya, with approximately 36 percent of the population living below the international poverty line of $2.15 per day despite substantial government investments in human capital. This study utilized a causal research design to investigate the effect of government expenditure on education, health, and technology on poverty rates in Kenya from 1975 to 2024. Employing an Autoregressive Distributed Lag model, the study analyzed both short-run and long-run relationships, using secondary data from the Kenya National Bureau of Statistics and the World Development Indicators, with the Stata software used for the econometric analysis. The findings revealed a stable long-run cointegrating relationship among the variables as confirmed by the Autoregressive Distributed Lag Bounds Test. The error correction term was statistically significant at the 1 percent level, indicating a moderate speed of adjustment, with over half of short-run deviations in poverty levels corrected each year. The findings further revealed that government expenditure on education had a statistically significant poverty-reducing effect in both the long run and the short run, significant at the 1 percent and 10 percent levels respectively. Similarly, government expenditure on health demonstrated a strong and statistically significant povertyreducing impact in both the long run and the short run, each significant at the 1 percent level. In contrast, government expenditure on technology and innovation was statistically insignificant in both the short run and the long run. Overall, the model exhibited strong explanatory power with a high goodness of fit. These results underscore that increased investments in education and health significantly contribute to poverty reduction in Kenya, guiding targeted policy formulation for efficient resource allocation. Based on these findings, the study recommends enhancing both the scale and quality of government expenditures in education and health to sustain and deepen their poverty-reducing impact. Its further advocates for a strategic reorientation of technology expenditure to prioritize digital inclusivity and its integration into essential services like education and healthcare. The study also highlights areas for further study on optimizing human capital spending, particularly in the technology sector, to ensure inclusive effect on poverty alleviation.
Effect of health sector expenditures on poverty rates in Kenya
(Chuka University, 2025-10) Bett Gidion
Governments aim to provide sufficient health coverage to maintain a healthy population, which is vital for economic productivity. Kenya government's financial commitment remains significantly low, averaging only 4.3% of Gross Domestic Product, well below the 15% target set by the Abuja Declaration. Adding to this challenge, external health aid, a key component of Kenya's health financing, has steadily declined since 1993. With rising population growth pressure, the low-income population suffers from high medication costs, out-of-pocket health expenses, and risks sliding or remaining in poverty due to increased healthcare costs and noncommunicable diseases. Data shows that about 36% of Kenyans live below the poverty line, with rural areas being more affected. Moreover, around one million Kenyans fall into poverty each year because of healthcare costs, worsened by the high prevalence of diseases such as cancer, HIV/AIDS, malaria, and tuberculosis. Empirical studies on Kenya have not substantially covered the link between persistent poverty rates and sectoral health expenditure. Additionally, most of the existing studies concentrate on out-of-pocket spending on healthcare. It is against this backdrop that this study sought to determine the impact of domestic, external, and private health expenditures on poverty rates in Kenya. The study was guided by the Keynesian theory of poverty and Grossman's theory of human capital. The study employed a causal research design and time series data from the World Bank, Kenya National Bureau of Statistics, and the Kenya Ministry of Health’s Annual Health Reports from 1990 to 2024. Autoregressive Distributed Lag Model was employed in the research to account for both short term dynamics in the economy and the long run impacts of the health sector expenditures on poverty. Error correction model and bound test was used to measure the spend of readjustment to normal in case of economic shocks hence ensure smooth the study the dynamic relationship between various health sector expenditures and poverty rates in Kenya. Cointegration was confirmed using the Bounds Test, leading to the reparameterization of the ARDL model into an Error Correction Model (ECM). The ECM captures both the short-run dynamics and the speed of adjustment toward the long-run equilibrium. According to the findings, government health expenditure demonstrated a statistically significant negative effect both in the long run and the short run. Private health expenditure had a statistically significant negative relationship with poverty rates, in the long run, while in the short run, it had a positive and significant effect. Conversely, external health expenditure showed a significant negative coefficient in the long run. The consistently strong and negative long-run coefficients for government health expenditure, external health expenditure, and private health expenditure unequivocally demonstrate that each component plays a significant role in reducing poverty rates. The research significantly provides insightful knowledge on the interplay of the health sub sectors in Kenya towards poverty alleviation. Both private sector, and government finds this research as a bedrock for reevaluation of health expenditures and need for preventive measure for both communicable and non-communicable diseases which has caused catastrophic spending that push individuals to poverty. Based on the findings, the main recommendation for Kenyan policymakers is to sustain and strategically increase public health expenditure, promote private firms, faith based organization and good partnership with international donors. This helps to reduce out of pocket spending. As well there is a need for true education on the principles of healthful living which is key input for productivity and efficiency in the economy.
Effect of internal control systems on quality of financial reports of non-deposit taking SACCOS in Tharaka Nithi county, Kenya
(Chuka University, 2024) Muendo Kavwele Alfred
The quality of financial reports of Savings and Credit Co-operatives (SACCOs) has been poor and declining in the past few years as evidenced by Tharaka Nithi Cooperative Audit Status Report 2022. To avoid this trend, SACCOs have focused on application of computerized systems to induce innovations and enhance the quality of reports and operations. The main objective of the study was to determine the effect of internal control systems on the quality of financial reports of non-deposit taking SACCOs in Tharaka Nithi County, Kenya. The specific objectives of the study were to determine the effect of control environment, control activities, risk assessment, information and communication and monitoring on quality of financial reports of nondeposit taking SACCOs. A census was taken of all the 35 non-deposits taking SACCOs that are incorporated and are headquartered and carry out their operations in the County. The study was anchored on agency theory, attribution theory and stewardship theory. The study used a structured questionnaire for data collection. Data was analyzed using both descriptive and inferential statistics with the help of Statistical Package for Social Sciences (SPSS) version 25.0. The hypotheses of the study were tested using t- test while the overall significance of the model was tested using F- Ratios at 5% level of significance. Multiple regression analysis was used to analyze the relationship between the variables in the study. Control environment has a regression coefficient (-0.721, P-value=0.006) implying that control environment has a negative statistically significant effect on quality of financial reports. Control activities have a positive statistically significant effect on financial report quality with a regression coefficient, which is (1.039, P-value=0.005). Risk assessment has a regression coefficient (0.703, P-value=0.035) implying that risk assessment has a positive statistically significant effect on quality of financial reports. Information and communication have a regression coefficient (0.817, P-value=0.000) implying that information and communication has a positive statistically significant effect on quality of financial reports. There was potentially insignificant moderation between internal control systems and competence of the board of directors with a regression coefficient of -0.659 and a p-value of 0.228>0.05. Findings from the study are expected to help determine the effect of internal control systems on quality of financial reports of SACCOs in Tharaka Nithi County. The study will help the SACCOs management understand the importance of having good internal controls that ensure quality financial records and report. This study will be of benefit to researchers since it will add to existing knowledge. The study recommends that firms should adopt proper control activities, develop risk identification, risk evaluation, risk response and risk program analysis strategies and ensure clear communication of information in order to improve the quality of financial reports.
EFFECT OF LOGISTICS MANAGEMENT FUNCTIONS ON PERFORMANCE OF THIRD-PARTY LOGISTICS SERVICE PROVIDERS IN NAIROBI CITY COUNTY, KENYA
(Chuka University, 2023-08) WEKESA TERRY
Studies reveal that the total logistics cost of third-party has increased as a result, the number of logistics (3PL) firms dropped from 44% to 36% of effective logistics services management. However, the inefficient logistics management systems reduce the capacity for 3PL businesses to meet customer needs for the least amount of money in the shortest amount of time possible frame and, hence, make them less competitive against their rivals. The performance analysis of 3PL firms in Nairobi County shows that most have wound up operations after being unable to withstand the competitive pressure in the market. Hence, the research sought to investigate how the outcomes of third-party logistics service providers' performance is influenced by logistics management in Nairobi County. It concentrated on the following specific objectives including; effect of transport management, inventory management, and warehousing management on performance of 3PL firms in Nairobi County. Theory of Constraints, Game theory and Theory of Inventory Management and Production aided the research. The study used descriptive research design aiming at 904 logistics companies operating in Nairobi County from this a sample of 90 third party logistics firms was chosen using a simple random sampling. The analysis's basic unit was the operations managers or their equivalent in charge of transport, inventory and warehousing. Data was collected using questionnaires. The research employed descriptive statistics to explain the basic attributes of the data. To determine the relationship between the variables, Pearson's product moment correlation coefficient was applied. Using SPSS version 25.0, a regression model was used to determine the impact of logistics management on third-party logistics service providers. The percentage of a dependent variable's variance that the independent variables in the regression analysis explain was displayed using R-squared 38.8%. The study established an insignificant effect between warehousing management and performance with regression coefficient 0.322 and a p-value 0.064. Further inventory management was found to be positively correlated to performance with a regression coefficient of 0.596 and a p-value of 0.007. Transport management had a regression coefficient of 0.925 and a p-value of 0.000 indicating it is significant. The interaction between firm size and logistics management functions the regression coefficient was -0.308 and a p-value of 0.376. The study concluded that inventory management and transport management had substantial impact on performance on 3PL firms and recommends that 3PL firms to apply inventory management and transport management in order to improve performance. On the other hand, warehousing management was found to be insignificant therefore it does not affect performance. Firm size was found not to alter the nexus between Performances of logistics management function. In order to give the various stakeholders in the third-party logistics industry insight and assistance in approaching logistics management functions in a way that would give them a competitive advantage.
Effect of mobile banking on financial performance of commercial banks listed at the nairobi securities exchange
(Chuka University, 2024) Simiyu Abraham Wanyonyi
A rapid change in information technology has greatly influenced firms‟ operations, including those in the banking sector. Banks are moving away from the manual banking system to more advanced information technology-based ways of banking. Mobile phone banking is the most recent innovation in the banking industry, with majority of banks embracing this technology. The purpose of this study was to determine the effect of mobile banking on financial performance of commercial banks listed at the Nairobi Securities Exchange. The specific objectives are to determine the effect of mobile banking transactions volume, mobile banking transactions‟ cost and mobile banking loans portfolio size on financial performance of commercial banks listed at the Nairobi Securities Exchange. The study also determined the moderating effect of bank size on the relationship between mobile banking and financial performance of commercial banks listed at the Nairobi Securities Exchange. The study employed descriptive research design. Secondary data was collected using a checklist, from the audited financial statements of 11 Kenyan commercial banks listed at the Nairobi Securities Exchange over a period of five years ranging from 20172021 and whose data was available for the study. The data analysis was carried out using STATA version 16. Simple and multiple linear regression with Driscoll-Kraay standard errors were used to address cross-sectional dependence. The hypotheses of the study variables were tested using t-statistic while the overall significance of the models was tested using F-statistic at 5% level of significance. The results were presented in tables. The study found that mobile banking transactions volume positively and significantly impact the financial performance of commercial banks. This is attributed to the convenience and efficiency that mobile banking provides, leading to increased customer satisfaction and retention, which in turn boosts profitability. The study did not find any significant effect of mobile transaction costs on ROE. A negative significant relationship between mobile banking loans portfolio size and ROE was found, possibly due to credit risk from higher default rates and the costs associated with managing a larger portfolio of smaller loans. Bank size was found to positively and significantly moderate the relationship between mobile banking and financial performance. Larger banks are more likely to benefit from economies of scale. They can invest more in technology, thus reaping greater benefits from mobile banking products such as Fund Transfers, E-funds transfers, and bill payments. Finally, mobile banking and bank size had a positive significant combined effect on ROE of Commercial banks. The study recommends that commercial banks should enhance transaction volumes via mobile platforms, bolster risk management for mobile loans, engage in strategic partnerships for smaller banks, and regularly evaluate their mobile loan portfolios for effective credit risk management to optimize profitability. The findings of the study would be useful to the management of commercial banks in enabling them to analyze the extent to which mobile banking has influenced banks‟ financial performance hence leverage of this financial innovation to boost banks‟ performance. The findings of the study also contribute to the body of existing knowledge in relation to the effect of mobile banking on financial performance of commercial banks.
Effect of non-monetary incentives on employee performance in commercial banks in Nyeri county, kenya
(Chuka University, 2024) Wanjiku Charles Gitau
The banking sector remains a crucial pillar of Kenya's economy, with the total assets of commercial banks steadily growing, reaching approximately Ksh 7.3 trillion in 2020, according to data from the Central Bank of Kenya. Despite this growth, employee performance in the sector has been a concern, with reports indicating a turnover rate of around 15% in recent years, as noted by the Kenya Bankers Association. The general objective of this study was to establish the effects of non-monetary incentives on employee performance in commercial banks in Nyeri County, Kenya. Specifically, the study sought to establish the effect of employee welfare, training, and Employee Autonomy on employee performance and to examine the moderating effect of work experience on the relationship between non-monetary incentives and employee performance. The study was guided by the Functional Theory of Labour Welfare, Social Learning Theory, and Self-Determination Theory. A descriptive research design was used, with the unit of analysis being employees working in commercial banks in Nyeri County, and the unit of observation being their performance. The target population was 543 respondents, with a sample size of 230 determined using the Yamane formula. Simple random sampling was employed, and data was collected through structured questionnaires. A pilot study was conducted in Murang’a County to pre-test and validate the questionnaire before the main study. Murang’a was selected for its similarity to Nyeri County in terms of socio-economic conditions, ensuring the pilot results were relevant for improving the study design. Quantitative data was analyzed using descriptive and inferential statistics with the help of SPSS version 28, with a confidence level of 95%. The study's findings showed that employee welfare (β = 1.811, p < 0.05), employee training (β = 0.441, p < 0.05), and Employee Autonomy (β = 0.822, p < 0.05) significantly improved employee performance. Work experience had a direct significant effect (β = 0.455, p < 0.05) and moderated the impact of non-monetary incentives on performance. The study concludes that non-monetary incentives play a crucial role in enhancing employee performance and recommends investing in welfare programs, continuous training, and increased Employee Autonomy while leveraging the experience of long-serving employees.
Effect of outsourcing on supply chain performance of state corporations in Nairobi city county, Kenya
(Chuka University, 2024) Mnangat Edward
State corporations have been characterized by the acquisition and provision of lowquality products and services, inefficiency, and enormous financial losses. An analysis of state corporations in the country revealed that they are experiencing dismal performance. This jeopardizes the capacity of state corporations to contribute to the GDP and the nation's economic development. 52 percent of business executives interviewed across a variety of worldwide industries believed that outsourcing could enhance performance. Hence, the study sought to determine the extent to which outsourcing would affect the supply chain performance of state corporations in Nairobi City County. It focused on the following objectives; examining the effect of SCIT outsourcing, logistics outsourcing, and human resource outsourcing on supply chain performance and determined the moderating effect of management support on the relationship between outsourcing and supply chain performance, and assessed the combined effect of outsourcing on supply chain performance. The core competency theory, resource-based view, and transaction cost theory guided the study. A descriptive research design targeted a sample size of 80 state corporations in Nairobi County was adopted. Procurement officers for the various state corporations were the respondents. Questionnaires were used to gather primary data. Descriptive statistics was adopted to describe the basic characteristics of the data. Pearson product-moment correlation coefficient was used to establish the correlation between the variables. Regression model was used to determine the effect of outsourcing on supply chain performance with the aid of SPSS version 28. At a 5% level of significance, the T- statistic was employed to evaluate the significance of the hypothesis while the F ratio was applied to assess overall significance. R squared was used to show the proportion of the variance for a dependent variable that is explained by the independent variables in the regression analysis. Findings of this study were that SCIT outsourcing does not affect performance ((t-statistic was 0.822, P-value 0.414> 0.05) while logistics and HR outsourcing affects performance of State corporations with ((t-statistic was 4.876, Pvalue 0.000< 0.05; (t-statistic was 4.469, P-value 0.000< 0.05). Management support has a negative moderating effect on the relationship between outsourcing and performance of state corporations ((t=-0.127, P-value=0.029<0.05). The results of the study will provide insight to the government, managers of corporations, and scholars. The government can use study findings in formulating regulations concerning SCIT, logistics and HR outsourcing in state corporations. Managers in various state corporations may be guided in formulating informed policy decisions on what to outsource in terms of SCIT, logistics and Human resource. Additionally, the investigation will contribute to the body of knowledge by providing both theoretical insights and empirical evidence on outsourcing and supply chain performance. The study recommends that organizations should approach SCIT outsourcing with caution, ensuring that it aligns with their strategic objectives and operational needs to maximize potential benefits. Additionally, organizations should consider logistics and HR outsourcing as a strategy to enhance their overall supply chain performance.

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