Relationship Between Macroeconomic Factors and Financial Performance of Agribusiness Companies Listed at the Nairobi Securities Exchange in Kenya

Abstract

Performance of any organization relates to its ability to seek resources needed for its operations and to manage them so as to give it an edge over the competitors. Financial performance measurement relies heavily on the variables that relate directly to financial statements. Some of the most commonly used measures of firm performance are return on assets and return on equity. Macro-economic factors are those that relate to the economy either at the regional or national level. Their effects cover a wider population as opposed to few selected individuals. The factors that have been identified and which have major influence are; inflation, gross domestic product (GDP), exchange rates, interest rates, the legal and regulatory environment and country risk. This study sought to test the relationship existing between macro-economic factors and financial performance of listed agri-business companies in Kenya. Descriptive correlation research design has been applied. The study targeted all the listed six agri-business companies at the Nairobi Securities Exchange (NSE) and covers the period between 2009 and 2013. The agri-business companies include; Eaagads Ltd, Kapchorua Tea Co. Ltd, Kakuzi Limited, Limuru Tea Co. Ltd, Sasini Ltd and Williamson Tea Kenya Ltd. The study has used secondary data obtained from the financial stataements. The data was collected from the annual financial statements of the target agri-business firms listed at the Nairobi Securities Exchange for the period 2009 to 2013. The data collected was analyzed with the aid of the software Statistical Package for the Social Sciences (SPSS). The results have been shown in terms of frequency distribution and percentages. The data was arranged and classified according to their common characteristics. The financial ratios like current ratio, operating cash flow ratio and Return on Capital Employed (ROCE) and capital structure were calculated for the period from 2009 to 2013