MACROECONOMIC FACTORS AND FINANCIAL PERFORMANCE OF KENYA TEA DEVELOPMENT AGENCY MANAGED FACTORIES IN WESTERN RIFT OF KENYA
MACROECONOMIC FACTORS AND FINANCIAL PERFORMANCE OF KENYA TEA DEVELOPMENT AGENCY MANAGED FACTORIES IN WESTERN RIFT OF KENYA
Alex Obuba Anyona - Masters Student, Master of Business Administration, Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Joshua Matanda - Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Kimani Maina - Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
The research project focused on investigating how macroeconomic variables impact the financial performance of the tea industry in Kenya. Guided by economic theories like the Purchasing Power Parity, Keynesian Economic Theory, the Cost-Push Inflation Theory, and the Quantity Theory of Money, the study aimed to evaluate how exchange rates, inflation rates, interest rates, and money supply influence the financial performance of Kenya Tea Development Agency (KTDA) managed factories located in the Western Rift region of Kenya. The literature review conducted for the research project provided a strong foundation for examining the effects of these macroeconomic variables on the financial performance of the KTDA managed factories. Through a critical analysis of existing literature, the study contextualized its investigation within the broader academic discourse on the topic. The research adopted a longitudinal approach to study the effects of macroeconomic variables on the performance of KTDA managed factories over a five-year period, spanning from 2017 to 2021. The secondary data necessary for the analysis were obtained from the financial statements of the factories, the Central Bank of Kenya (CBK), and the Kenya Bureau of Statistics (KNBS). The study's population consisted of all 19 KTDA managed factories located in the Western Rift region of Kenya. To examine the relationships between the independent variables (exchange rate, interest rate, inflation rate, and money supply) and the dependent variable (Return on Equity on a quarterly basis), the research employed regression analysis. The chosen analytical model was multivariate and descriptive in nature, where the coefficients of the macroeconomic variables were represented as "β." In order to establish the significance of the relationships between the variables, the research conducted several diagnostic tests. These tests included the assessment of multicollinearity, heteroscedasticity, autocorrelation, linearity, and normality. These tests aimed to ensure the validity and reliability of the regression analysis results. For the data analysis process, the research project utilized Statistical Software SPSS version 28. This software facilitated the thorough examination of the collected data and enabled the drawing of meaningful conclusions about the impact of macroeconomic variables on the financial performance of the KTDA managed factories. The study highlighted the key findings based on the research objectives, concluding that lending rates, consumer price index, and money supply significantly impacted the financial performance of KTDA managed factories. However, exchange rates were not found to have a statistically significant effect. The study recommended implementing proactive measures to mitigate the impacts of lending rates, consumer price index, and money supply on the financial performance of KTDA managed factories, while also highlighting the need for additional research in exploring the dynamics of exchange rates in the context of the tea industry.
