CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN KENYA
CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN KENYA
Kirui Cheruiyot Zacchaeus - PhD Fellow, Department of Accounting and Finance, Kenyatta University, Kenya
Prof Ambrose O. Jagongo (PhD) - Associate Professor, Accounting and Finance Department, Kenyatta University, Kenya
ABSTRACT
The DT-SACCOs are very crucial in financial sector of Kenya in terms of financial inclusion, savings mobilization, and providing credit. Nevertheless, there are still issues of capital adequacy, liquidity management, and financial performance sustainability in the sector that is related to the growing regulatory and competition pressure. Although capital structure choices are very crucial, the existing empirical data on the impacts of individual capital structure variables on financial viability of DT-SACCOs in Kenya is inconclusive and inconsistent with little consideration on moderating effect of the firm size. This study will aim to analyze how capital structure influences the financial wellness of DT SACCOs in Kenya, where the main independent variables will be debt ratio, equity ratio and liquidity and the main dependent variables are the financial performance that is measured by ratio of the return on assets and return on equity ratio. Firm size comes in as a moderating variable used in the connection amongst capital structure and financial wellness. Pecking order theory, trade-off theory and agency theory are the theories anchored in this study. Positivist research philosophy and longitudinal panel research design are adopted. Secondary data will be obtained from audited financial reports and regulatory reports provided to SASRA in the year 2016 to 2025. The panel data regression techniques, which include random effects, fixed effects and moderated regression analysis are used in analyzing data. Study findings will give empirical support on the importance of capital structure in promoting financial soundness of DT-SACCOs as well as elucidate whether firm size enhances or dilutes the association amongst capital structure and financial soundness of DT-SACCOs. This study enhances the current body of capital structure in cooperative financial institutions and provides useful information to the SACCO management, regulators, and policymakers in crafting strategies geared towards enhancing financial stability and performance in the SACCO segment.
