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Payment Delays and Financial Performance of Construction Firms in Vihiga County, Kenya

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  • Brenda Ajema Kalegera
  • Nixon Oluoch Omoro

Abstract

The purpose of this study was to establish whether payment delays affect financial performance of construction firms. The study employed cross sectional research design, stratified simple random sampling and census survey of 32 construction firms. The study relied on secondary data from audited financial reports. Data was analyzed using both descriptive and inferential statistics - multivariate analysis. There was no statistical significant effect between delayed payments and financial performance as measured by Net profit margin and current ratio, probably other factors or measures such as management style and strategies could have affected the two variables. Our conclusion however, is that late payments in commercial transactions by the public or generations and private entities have detrimental effects on the business environment, especially by exacerbating the burden of already financially constrained firms which can ultimately push them out of business. The study was only limited to one financial year and construction firm.

Suggested Citation

  • Brenda Ajema Kalegera & Nixon Oluoch Omoro, 2020. "Payment Delays and Financial Performance of Construction Firms in Vihiga County, Kenya," Applied Economics and Finance, Redfame publishing, vol. 7(3), pages 44-54, May.
    • Handle: RePEc:rfa:aefjnl:v:7:y:2020:i:3:p:44-54
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    References listed on IDEAS

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    1. John Y. Campbell & Jens Hilscher & Jan Szilagyi, 2008. "In Search of Distress Risk," Journal of Finance, American Finance Association, vol. 63(6), pages 2899-2939, December.
    2. Checherita-Westphal, Cristina & Klemm, Alexander & Viefers, Paul, 2016. "Governments’ payment discipline: The macroeconomic impact of public payment delays and arrears," Journal of Macroeconomics, Elsevier, vol. 47(PB), pages 147-165.
    3. Ms. Suzanne Flynn & Mario Pessoa, 2014. "Prevention and Management of Government Arrears," IMF Technical Notes and Manuals 2014/003, International Monetary Fund.
    4. Suzanne Flynn & Mario Pessoa, 2014. "Prevention and Management of Government Arrears," IMF Technical Notes and Manuals 14/03, International Monetary Fund.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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