Effect of price fluctuations on financial performance of agribusiness firms in Kenya

Abstract

This study focused on price fluctuations and their influence on the financial performance of agribusiness firms in Kenya. The study was guided by three specific objectives: Establish the effect of international commodity price fluctuations on the financial performance of agribusiness firms in Kenya; determine the effect of raw material price fluctuations on the financial performance of agribusiness firms in Kenya; establish the effect of cost of labour fluctuation on the financial performance of agribusiness firms in Kenya and determine the moderating effect of subsidy fluctuations on the financial performance of agribusiness firms in Kenya. The study involved a survey of agribusiness firms that are operating in Kenya. Secondary data was collected for the purpose of answering the research questions. Stratified sampling was adopted in selecting 27firms that formed the sample size. Regression analysis was used to determine the effect of price fluctuations on the financial performance of agribusiness firms in Kenya. The research established that based on the data collected, the impact of international commodity prices and raw materials prices are not very significant in affecting financial performance. Cost of Labour fluctuation was found to be a significant factor affecting the financial performance of the agribusiness firms with or without the moderating effect of subsidy fluctuations. However, before the introduction of subsidy fluctuations into the regression model, all the three variables, international commodity price fluctuation, raw material price fluctuation and cost of labour fluctuation were found to have a statistically significant relationship with ROA. It was further evident from the research findings that the moderating effect of subsidies indicates that it has a significant effect on financial performance.The study recommended that subsidies granted by government in agribusiness should be grounded on facts about their impact on price fluctuations and eventually their consequences on the profitability of the market.