Effect of restructuring on performance of small and medium enterprises in ICT sector in Kenya

Abstract

The main objective of this study was to establish the effect of restructuring on performance of SMEs in ICT sector in Kenya. Specifically, the study examined the three modes of restructuring; Financial restructuring, portfolio restructuring and operational restructuring and the effect of each mode of restructuring to SMEs’ performance using ten key performances namely Sales, Profit margins, cash flow, revenue, Liquidity, overall business profitability, Business Image, efficiency, productivity and staff morale. The study also sought to establish the relationship between restructuring and SMEs’ performance using overall profitability weighted through regression analysis model. In addition, it sought to establish the most common mode restructuring among SMEs. The primary data was collected through self administrated questionnaire to the staff in management of the SMEs in ICT sector. Purposeful sampling was used to target specific staff with the required information; mostly owners and shareholders. Both descriptive and inferential statistics were used. Data reliability was done using Cronbach’s Alpha. Data was analyzed using descriptive methods and multiple regression model. The study found that a strong relationship exist between restructuring and performance. Positive performance was observed as a result of restructuring. Portfolio restructuring was found to have greatest and quick effect on performance while operational restructuring had significant effect on performance on long term basis. Financial restructuring was observed as link between the other two modes of restructuring for better performance results. Financial restructuring was found to be the most preferred mode of restructuring. The study also observed that all the three modes of restructuring interacted with each other as indicated.