The Effect Of Venture Capital Financing On Investment In Kenya

Abstract

The objective of the study was to establish the effect of venture capital financing on investment in Kenya. To achieve this objective venture capital was disaggregated into two variables, namely, the number of firms financed and the total amount of financing. Other variables were also included in the analysis to act as control variables; these were interest rate and GDP per capita. The study used 10 years’ data spanning from 2009 to 2018. Descriptive analysis namely, measures of dispersion and central tendencies were applied to the data. Additionally, empirical analysis and regression were applied to the data to make the results inferable. From the regression results. The coefficient of determination of the model was 0.9165, these results indicate the model is a good fit. The F statistics of the model is 13.72 and the P-value is 0.006, showing that the model is suitable in predicting the population parameter. The coefficient for the number of financed firms was 0.5813, while that for the total amount of financing was 0.1367. The partial slope coefficient for interest rate was -0.1810 and that for GDP per capita was 0.6410. All these variables were significant at 1 percent level. The study concludes that venture capital financing has a positive effect on aggregate investment levels in Kenya. The study recommends that the government should come up with ways of financing small and medium enterprises, this will boost their productive capacities thus leading to more investment in the country and more generation of income.