ELECTRIC POWER OUTAGE DYNAMICS AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS IN KENYA

Abstract

Past literature portrays most manufacturing firms in both developed and developing economies as
reliant on electric power supply for their operations. Therefore, occurrences of electric power
outage create operational threats to the firms. This study aimed at establishing the influence of
electric power outage dynamics on financial performance of manufacturing firms in Kenya. The
study utilized positivism philosophical point of view and descriptive survey research design. The
null hypothesis which stated that the relationship between electric power outage dynamics and
financial performance of manufacturing firms in Kenya is not significant was tested at 95%
confidence level whereby multiple regression models were incorporated for data analysis. A
population of 447 manufacturing firms in Kenya with membership of Kenya Association of
Manufacturers (KAM), was considered for the study out of which a sample size of 138 firms was
drawn using stratified random sampling. Structured questionnaires were utilized to collect data
which involved drop and pick approach. The research results indicate that electric power outage
dynamics had statistically significant influence on financial performance. T-test results indicated
that for every unit alteration in power outage frequency, financial performance varied by .332
units which was negative and statistically significant with (p<05). Whereas, a unit adjustment of
power outage duration translated to .061 unit direct alteration of financial performance of firms
in Kenya undertaking manufacturing activities, which was not statistically significant with
(p>.05). For power outage notification, a unit variation resulted to .032 unit alteration of financial
performance of Kenyan based manufacturing firms which was positive and not statistically
significant with (p=.805). This study outcome enlarges existing knowledge on electric power
outage dynamics and financial performance for it is evident that electric power outage dynamics148
Njiraini et al
ELECTRIC POWER OUTAGE DYNAMICS AND FINANCIAL PERFORMANCE OF
MANUFACTURING FIRMS IN KENYA
Winfred Wanjiku Njiraini1, Mirie Mwangi2, Erasmus Kaijage3, Pokhariyal Ganesh4
1PhD Candidate, Department of Finance and Accounting, School of Business, University of Nairobi
2,3Department of Finance and Accounting, School of Business, University of Nairobi
4Department of Applied Mathematics, School of Mathematics, University of Nairobi
Abstract
Past literature portrays most manufacturing firms in both developed and developing economies as
reliant on electric power supply for their operations. Therefore, occurrences of electric power
outage create operational threats to the firms. This study aimed at establishing the influence of
electric power outage dynamics on financial performance of manufacturing firms in Kenya. The
study utilized positivism philosophical point of view and descriptive survey research design. The
null hypothesis which stated that the relationship between electric power outage dynamics and
financial performance of manufacturing firms in Kenya is not significant was tested at 95%
confidence level whereby multiple regression models were incorporated for data analysis. A
population of 447 manufacturing firms in Kenya with membership of Kenya Association of
Manufacturers (KAM), was considered for the study out of which a sample size of 138 firms was
drawn using stratified random sampling. Structured questionnaires were utilized to collect data
which involved drop and pick approach. The research results indicate that electric power outage
dynamics had statistically significant influence on financial performance. T-test results indicated
that for every unit alteration in power outage frequency, financial performance varied by .332
units which was negative and statistically significant with (p<05). Whereas, a unit adjustment of
power outage duration translated to .061 unit direct alteration of financial performance of firms
in Kenya undertaking manufacturing activities, which was not statistically significant with
(p>.05). For power outage notification, a unit variation resulted to .032 unit alteration of financial
performance of Kenyan based manufacturing firms which was positive and not statistically
significant with (p=.805). This study outcome enlarges existing knowledge on electric power
outage dynamics and financial performance for it is evident that electric power outage dynamics
have statistically significant influence on financial performance. Therefore, top management of
manufacturing firms should focus on optimal mechanisms for management of power outage
frequencies in order to mitigate their negative effect on financial performance. The study also
provides an input to the academic literature arising from assimilation of transformation theory
and the cost-of-production theory of value. KAM will find these research findings useful in
advocating the Government for better efficiencies in electric power supply systems. Additionally,
KAM member firms are guided to adopt strategies to mitigate against negative effects of power
outages such as production stoppages that result in damages and increased production costs that
ultimately results in negative impact on firms’ financial performance.
Keywords: Electric Power Outage Dynamics, Financial Performance, Manufacturing Firms