• David Masika Kenyatta University
  • Eddy Simiyu Kenyatta University
Keywords: firm size, leverage, growth, liquidity, financial performance, deposit taking SACCOs


Purpose of the study: Savings and credit cooperatives societies (SACCOs) in Kenya are set up to mobilize members’ funds and grant credit for the members’ development. Therefore, in spite of the importance of this sector, these firms are faced with a problem of variability in financial performance which has made it difficult for them to grow their wealth and contribute significantly to National Domestic Savings. Literature suggests that firm characteristics determine performance of deposit taking SACCOs, but it is not clear to what extent. The objective of this study is to examine the effect of firm characteristics on the financial performance of Deposit taking saving and credit cooperatives societies licensed by SASRA in Nairobi County extended from the period 2012 to 2015. The specific objectives were; to evaluate the effect of firm size on financial performance of deposit taking SACCOs, to assess the effect of level of leverage on financial performance of deposit taking SACCOs, to determine the effect of growth on financial performance of deposit taking SACCOs and to establish the effect of liquidity on financial performance of deposit taking. The theories of trade off, agency cost, pecking order and growth of the firm will be reviewed to point out the knowledge that already exists and known about the effect of firm characteristics on financial performance.

Methodology: The research adopted causal design.

Results of the study: Model summary results revealed that firm size, leverage, growth and liquidity explain 42.3% of financial performance of deposit   taking   SACCOs. Regression of coefficients results showed that firm size and financial performance of deposit taking SACCOs in Kenya are positively and significantly related. The results also revealed that leverage and financial performance of deposit taking SACCOs in Kenya positively and significantly related. The results also revealed that firm growth and financial performance of deposit taking SACCOs in Kenya are positively and significantly related. It was also established that firm liquidity and financial performance of deposit taking SACCOs in Kenya are positively and significantly related.

Conclusion and policy recommendation: Based on the findings above, the study concluded that firm size and leverage have a significant effect on financial performance of deposit taking SACCOs in Kenya. The study recommends that in order for deposit taking SACCOs to increase their performance (profitability) there is need for deposit taking SACCOs to increase size by expanding their customer base, net assets, deposit liabilities and market share. The study also recommends that firms should negotiate for better and longer credit terms in relation to repayment terms and interest rates. A Sacco should keep in balance the financing of the firm by debt to ensure that it does not rely much on debt. The study recommends vertical growth of a firm by investing in diversified portfolio.

Keywords: firm size, leverage, growth, liquidity, financial performance, deposit taking SACCOs

Author Biographies

David Masika, Kenyatta University

Post graduate student, Kenyatta University

Eddy Simiyu, Kenyatta University

Lecturer, Kenyatta University 


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How to Cite
Masika, D., & Simiyu, E. (2019). EFFECT OF FIRM CHARACTERISTICS ON FINANCIAL PERFORMANCE OF DEPOSIT TAKING SACCOS LICENSED BY SASRA IN NAIROBI,KENYA. African Journal of Emerging Issues, 1(4), 48 - 73. Retrieved from https://ajoeijournals.org/sys/index.php/ajoei/article/view/26