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Effect of Financial Leverage on Financial Performance of Deposit Taking Savings and Credit Co-operative in Kenya

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  • Moses Ochieng Gweyi
  • John Karanja

Abstract

The aim of this study was an attempt to investigate the effect of financial leverage on financial performance of deposit taking Saccos in Kenya. The sample data was extracted from 40 Savings and Credit Co-operative Societies (Saccos) registered by Sacco Society Regulatory Authority (SASRA) extended from the period 2010 to 2012. The secondary data used for analysis was collected from the financial statements of the various deposit taking Saccos. Two basic approaches descriptive and analytical design were adopted. The results show perfect positive correlation between debt equity ratio with return on equity and profit after tax at 99% confidence interval and a weak positive correlation between debt equity ratio with return on assets and income growth. As the scope of study is limited to the deposit taking Saccos and the sample size is small, the findings of the study must be interpreted with caution and the results may not be generalized to the Sacco sector. This is the first study that examines the relationship between financial leverage on financial performance of deposit taking savings and credit co-operative in Kenya.

Suggested Citation

  • Moses Ochieng Gweyi & John Karanja, 2014. "Effect of Financial Leverage on Financial Performance of Deposit Taking Savings and Credit Co-operative in Kenya," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 176-184, April.
    • Handle: RePEc:hur:ijaraf:v:4:y:2014:i:2:p:176-184
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    1. James Sunday Kehinde & Sehilat Abike Bolarinwa & Olukayode Ezekiel Ibironke, 2022. "Firm Size, Financial Leverage and Firm Performance: Evidence from Firms Listed in the Non-Financial Sectors of the Nigeria Stock Exchange," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(12), pages 188-195, December.
    2. Benjamin Otwoko & Kimani Maina, 2021. "Effect of liquidity risk on the financial performance of deposit taking savings and credit cooperative organisations (SACCOs) in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(2), pages 203-211, March.

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