The Relationship Between Budgetary Participation And Financial Performance Of Manufacturing Companies In Kenya

Abstract

The topic of budget participation has always received a considerable interest among researchers. There are conflicting findings on the significance of budgetary participation. Most of the previous studies have focused on the USA, the UK and Australia. The objective of this study was therefore to establish the relationship between budgetary participation and financial performance of manufacturing companies. Budgetary participation factors were decomposed into for main variables which are: organizational, interpersonal, individual and organizational commitment variables. Budgetary participation was measured by the degree of involvement at each of the four variables and this created an objective way to consider the degree of participation. The study adopted a descriptive research design. The population for this study was manufacturing companies in Kenya. The study entailed the collection of both primary and secondary data. The primary data was gathered through a semi-structured questionnaire which was administered by the researcher to facilitate a probing inquiry. The questionnaire had both open and closed ended questions. The questionnaire contained simple questions, which the respondents were able to answer without so much difficulty. Secondary data was collected from the companies’ financial statements where need arose. The researcher carried out a pilot study to pretest the validity and reliability of data collected using the questionnaire. Data analysis used SPSS (version 17) and Microsoft excels percentages, tabulations, means and other central tendencies. Tables were used to summarize responses for further analysis and facilitated comparison. In addition, to quantify the strength of the relationship between the variables, the researcher used a multiple regression analysis. The study found out that Net profit Margin as a financial performance measure was more favorable to the respondents as compared to Return On Investment (ROI). This is shown by a mean of 4.5 as compared to 3.6; the studies also found out that Return on Investments as a performance measure is affected by organizational variables to a great extent as shown by a mean of 4.0. The study concludes that organizational variables, interpersonal variables, individual and motivational variables of budget participation all affect financial performance of the companies but more weight was realized organizational and interpersonal variables. Motivation and individual factors on budget participation had lesser effect to financial performance.