The Relationship Between Financial Innovations and Financial Performance of Telecommunication Firms in Kenya

Abstract

Globally, financial innovations are heavily used by telecommunication companies to remain profitable against the backdrop of increased regulation, globalization and stiff competition. The study investigated the relationship between financial innovations and financial performance of telecommunication firms in Kenya. In this study, descriptive research design was applied. The study target population was the four telecommunication companies operating in Kenya for at least 10 years. The study used secondary data. Quantitative secondary data was obtained from published annual financial statements for the firms studied and reports published by the Communication Authority of Kenya (CAK). The study used descriptive statistics to analyse the quantitative data. In this case the mean, standard deviation, percentage and frequencies were used to show the trend of the results over the ten-year period (2007-2016). In addition, multiple regression analysis was used to ascertain the nature, magnitude and direction of the relationship. From the findings, the study concludes that; there was a increased financial performance of telecommunication firms in Kenya over the period 2007 to 2016. The mobile money transfer, agency services and financial strategic alliances as financial innovations by telecoms in Kenya significantly contributed to their financial performance. The mobile money transfer as a financial innovation contributes most to the financial performance followed by mobile money agency services and financial strategic alliances respectively. The most significant financial innovation influencing financial performance of telecommunication firms is mobile money transfer followed by mobile money agency services and financial strategic alliances respectively. The management of the telecommunication firms should continuously invest in cutting edge technology that support the mobile money transfer to ensure minimal interruption and its scale up and security. The management of the telecommunication firms should regularly review the agency policy to make it more attractive to existing and prospective agents for their signing up. The management of the telecommunication firms should expand financial strategic alliances with other sectors of the economy as it has proved beneficial in creating their competitive advantage and in enhancing their financial performance.