Effect Of Custom Duty Incentives On Financial Performance Of Manufacturing Companies In Kenya

Abstract

Background: The purpose of the study was to assess the effect of custom duty incentives on the financial performance of manufacturing firms in Kenya. The study focused on the manufacturing companies registered by Kenya Association of Manufacturers. Materials and Methods: The population of the study was the 447 manufacturing companies in the register of Kenya Association of Manufacturers in 2019. The study applied a stratified random sampling technique in the determination of the sample size, where 211 manufacturing companies were selected for the study. Primary data was collected by the use of questionnaires targeting accountants and other senior management officers in manufacturing companies. Secondary data was collected from audited financial statements covering a period of 10 years from 2009 to 2018. The response rate on the questionnaires was 73.5 %. Data analysis was performed by use of SPSS version 25. The study performed both descriptive and inferential statistics, diagnostic tests involving multi-collinearity tests, auto-correlation, heteroscedasticity and test of normality were carried out. Results: The data did not suffer from multi-collinearity neither was there auto-correlation; however, the data violated the assumption of normality. The study applied ordinal regression analysis so as to determine the predictive model. Pseudo-R square was computed which showed that custom duty incentives explain 4% of the change in financial performance meaning there are other factors that contribute to the change in financial performance. The results of the study also showed that custom duty incentive has a statistically significant relationship with the financial performance of manufacturing companies. Conclusion: The conclusion of the study was custom duty contributes positively to the financial performance of manufacturing companies in Kenya. The study recommended that manufacturing companies should embrace the aspects of custom duty incentives offered by the government.