Effect Of Elecronic Retail Payment Systems Adoption On Financial Performance Of Medium And Large Supermarkets In Nairobi County, Kenya

Abstract

A key assumption of most research work done on the improvement of operations has been technological innovations and adoptions are directly proportional to improvements in performance. The process of technological innovation and implementation forms a critical part in the growth of many nations. A change of past techniques and adoption of local technology similar to that of more advanced industrialized nations lead to indigenous technological innovations. The advancement in technology has made some tasks more efficient and cheaper but it also has its fair share of challenges. This has seen firms in the retail sector apply technology in their payment systems to reduce costs and enhance financial performance and convenience but this adoption has not been embraced fully. This study sought to determine the effect of electronic retail payment system adoption on financial performance of medium and large supermarkets in Nairobi County, Kenya. The population for the study was all the 87 large and medium supermarkets in Nairobi County while the sample was 30 supermarkets that had their head office in Nairobi. The independent variables for the study were electronic retail payment system adoption as measured by the natural logarithm of the total value of transactions through the electronic retail payment system on an annual basis, capital structure as measured by debt ratio, liquidity as measured by current ratio and firm size as measured by natural logarithm of total assets. Financial performance was the dependent variable and was measured by return on assets on an annual basis. Secondary data was collected for a period of 5 years (January 2013 to December 2017) on an annual basis. The study employed a descriptive cross-sectional research design and a multiple linear regression model was used to analyze the relationship between the variables. Statistical package for social sciences version 21 was used for data analysis purposes. The results of the study produced R-square value of 0.345 which means that about 34.5 percent of the variation in financial performance of medium and large supermarkets in Nairobi County, Kenya can be explained by the four selected independent variables while 65.5 percent in the variation in financial performance was associated with other factors not covered in this research. The study also found that the independent variables had a strong correlation with financial performance (R=0.587). ANOVA results show that the F statistic was significant at 5% level with a p=0.000. Therefore the model was fit to explain the relationship between the selected variables. The results further revealed that only electronic retail payment system adoption and liquidity produced positive and statistically significant values for this study. Capital structure and firm size were found to be statistically insignificant determinants of financial performance among medium and large supermarkets in Nairobi County, Kenya. This study recommended that adequate measures should be put into place to improve and grow electronic retail payment system adoption and liquidity of supermarkets as they significantly influence financial performance.