Effect of Tax Incentives on Financial Performance of Export Processing Zone Firms in Kenya

Abstract

This study had an objective of establishing the effect of tax incentives on financial performance of export processing zone firms in Kenya. The control variables for this study included the size of the firm as measured by the natural logarithms of the total assets of the firm and the efficiency of asset utilization. This research embraced quantitative descriptive research design. The population of this study comprised all the firms registered and licensed by Export Processing Zone Authority as at 2016. The sample of the study was 70 firms which enjoyed tax incentives for the period under study. Secondary data was collected from KRA and EPZA authority which was then analyzed using multiple regression analysis to establish the relationship between tax incentives and financial performance of EPZ firms in Kenya. This study established that there is a weak positive relationship between tax incentives and financial performance of EPZ firms in Kenya. It also revealed that that was a significant relationship between the efficiency of asset utilization and financial performance, as for the size of the firm, the study found a negative relationship with the financial performance and therefore recommended the firms to dispose off idle assets as it seemed to be incurring some cost to maintain them. The study therefore recommended