Determinants Of Financial Performance Of Export Processing Zone Companies At Athi River In Kenya

Abstract

Export Processing Zones (EPZs) in Kenya were created with the aim of enhancing manufacturing sector output, exports, employment, value addition and technology transfer. However, their success in promoting trade across countries has been significantly realized. This study assessed the determinants of financial performance of Export Processing Zones companies in Kenya Companies with a focus on Export Processing firms at Athi River. The study key objectives was to assess the effect of investment policies, internal controls, resource management and operational efficiency on financial performance. The study adopted descriptive research design approach. The target population of the study was the 73 EPZ companies in Athi River, Kenya. The study adopted the use of secondary data where panel data was used. The study conducted Multicollinearity, Heteroscedasticity, Normality test, Autocorrelation Test and Durbin – Wu –Hausman Test. The data was analyzed using descriptive and inferential statistics. The results indicated that Investment policy had a positively and significantly relationship with financial performance of the Export Processing Zones companies in Kenya. Internal controls was also positively and significantly related to financial performance of the Export Processing Zones companies in Kenya. Resource Management was positively and significantly related to financial performance of the Export Processing Zones companies in Kenya. Lastly, Operational Efficiency had a positively and significantly related to financial performance of the Export Processing Zones companies in Kenya. The study concluded that Investment policy, Internal Control, Resource Management and Operational Efficiency affected financial performance of the Export Processing Zones companies in Kenya in a positive and significant way. The study recommends that the EPZ firms should consider having more current allocation on investments given the EPZ incentives provided in the EPZ zones such as ax incentives, lower land rentals, exemption of import, export and value-added taxes and reduced regulatory oversight in administrative and customs procedures. Further, the firms should develop internal control systems that are in line with their financial performance of the organization. The study recommends that the EPZ firms should work to reduce their resource cost variance by to maintain optimal use of their resources. Lastly, the study recommends that firms should strive to reduce their operating expenses and implement efficient strategies that address asset and inventory turnover.