Effect of Budgetary Controls on Financial Performance of Agro-veterinary Medicine Manufacturing Companies in Kenya

Abstract

The main objective of this study was to establish the effect of budgetary controls of financial performance of agro-veterinary medicine manufacturing companies in Kenya. The study was founded on two theories namely: Cognitive Evaluation Theory and agency theory. A descriptive research design was adopted and the unit of observation comprised of all the 28 companies registered in Kenya for the manufacture of agro-chemicals in Kenya. Census study approach was used and involved all the 28 companies. Secondary data were gathered through a document review guide, and ran through STATA version 14. Descriptive and inferential analysis were carried out. The correlation analysis results indicated that there was a strong positive and significant association between firm size and ROE, also the results indicated that there was strong positive and significant association between PVR and ROE and lastly, there was a negative and significant association between labor productivity and ROE. Regression analysis results showed that budgetary control on financial performance explained up to 69.68% of variations in financial performance of agro-veterinary medicine manufacturing companies in Kenya. This was based on the resultant determinant coefficient (R2) value equivalent to 0.6968. The results further indicated that during the study period 2013 – 2017 holding other factors constant at zero, a unit increase in PVR led to 1.206 units increase in financial performance, the P value was less than the significance level alpha = 0.05 implying that the relationship was positive and statistically significant. Also a unit increase in firm size led to 3.527 units increase in financial performance, the P value was less than the significance level alpha = 0.05 implying that the relationship was positive and statistically significant. Lastly, a unit increase in labor productivity led to 0.513 units increase in financial performance, the P value was less than the significance level alpha = 0.05 implying that the relationship was positive and statistically significant. It was concluded that there was a strong positive and significant correlation between firm size and ROE, there was strong positive and significant association between PVR and ROE and lastly, there was a negative and significant relationship between labor productivity and ROE. It was recommended that budgetary controls are important in influencing financial performance of agro veterinary Medicine Companies in Kenya.