Influence of Business Risk on Financial Performance of State-Owned Sugar Manufacturing Corporation Projects in Western Region, Kenya

Abstract

The study examined the level at which business risk as capital structure decision influenced financial performance of State-owned sugar corporation projects in western region, Kenya. The research was guided by Modigliani and Miller’s capital structure (1958) model mainly- (Trade-off; Pecking order and Agency cost theories). Pragmatism paradigm approach was applied as a method that enabled the use of mixed research. The study used both descriptive survey and correlational design to analyse data. A target populace of 1145 drawn from employees of State sugar sectors was used. Krejcie and Morgan (1970) model was used to obtain a sample size of 291. The main instrument for data collection was structured questionnaire supported by interview guide. The questionnaire was administered to employees of sugar sector and relevant government agencies while interview guide was administered to opinion leaders in the sugar belts. Analysis of numerical data was done using both descriptive and inferential statistical approach aided by Statistical Package for Social Science version25. Qualitative data was collected with the help of narrative statements based on themes. In order to determine the relationship between the variables, Simple and Multiple Linear Regression as well Pearson correlation Coefficient were used. Hypothesis (Ho1; There is no relationship between business risk and financial performance of State -owned sugar manufacturing corporations was tested at a= 0.05. Since p=0.000<0.05 Ho1 was rejected. The results of the study were expected to help stakeholders in State sugar corporations to provide information on how to utilize capital structure decisions that influence financial performance.

Keywords: Business risk; Capital structure decisions; financial performance; State sugar manufacturing corporation projects