INFLUENCE OF INTEREST RATE ON THE FINANCIAL PERFORMANCE OF AGRICULTURAL FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE
DOI:
https://doi.org/10.47672/ajf.140Keywords:
Interest rate, financial performance, financial performance analysis, listed Companies.Abstract
Purpose: The purpose of this study was to establish to establish the influence of interest rate on the financial performance of agricultural firms listed at the Nairobi Securities Exchange.
Methodology: The research design adopted was descriptive and causal (explanatory). A census approach was adopted and all the seven listed agricultural companies were taken as the population. The respondents' sample was from finance departments at all levels and 220 questionnaires were administered. Primary data was collected using questionnaires while the secondary data was collected using data collection sheets from the firms as well as from the Nairobi Securities Exchange and CMA records. The particular inferential statistic was regression and correlation analysis. Panel data methodology was employed using a multivariate regression model to test the hypotheses and link the variables.
Results: The findings revealed that interest rate has a positive and significant relationship with ROA, ROE and EPS. In addition, the findings from the interaction of the independent variables and the interest rate revealed that interest rate moderate the effect of financial performance of agricultural firms listed at the Nairobi Securities Exchange.
Unique contribution to theory, practice and policy: The study recommends that financial institutions and banks in Kenya should assess their clients which include agricultural firms listed in NSE while setting up interest rates policies, as ineffective interest rate policies can increase the level of interest rates and consequently cost of borrowing and negate financial performance of the borrowing firms. The study also recommends that the Central Bank should apply stringent regulations on interest rates charged by financial institutions so as to regulate their interest rate spread.
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Copyright (c) 2017 Dr. Samuel Kanga Odalo, Dr. George Achoki, Dr. Amos Njuguna
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