IDEAS home Printed from https://ideas.repec.org/a/hur/ijarbs/v7y2017i7p83-100.html
   My bibliography  Save this article

Influence of Financial Reporting Requirement on Formalizing Small and Medium Enterprises in Kenya

Author

Listed:
  • Damaris W. Muhika
  • Agnes W. Njeru
  • Esther Waiganjo

Abstract

This research article sought to establish the influence of financial reporting requirement in formalizing small and micro enterprises in Kenya. The study took the form of a descriptive survey design which is an efficient method of collecting original data and systematic information from a wide range of respondents. The target population was 1200 SME’s operating in Nairobi Central Business District and registered with the Nairobi County government. The sample size was 369 respondents, calculated using Yamane Sampling Formula. The study employed stratified and systematic random sampling to select SME’s from 4 different sectors and also incorporated commercial banks and microfinance institutions in the sampling distribution. Data was collected by use of open and close-ended questionnaires supplemented by an interview schedule and an observation checklist. The researcher used descriptive and inferential statistics such as mean, standard deviation, correlation and multiple regression analysis. The study findings showed that availability of financial records eliminate information asymmetry thus allowing for better monitoring. Further, availability of quality and credible financial information enhances business access to loan facilities and better credit terms. The study recommended that the SMEs need to formalize their operations to ease credit access from lenders hence realize growth and improved performance.

Suggested Citation

  • Damaris W. Muhika & Agnes W. Njeru & Esther Waiganjo, 2017. "Influence of Financial Reporting Requirement on Formalizing Small and Medium Enterprises in Kenya," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(7), pages 83-100, July.
    • Handle: RePEc:hur:ijarbs:v:7:y:2017:i:7:p:83-100
    as

    Download full text from publisher

    File URL: http://hrmars.com/hrmars_papers/Influence_of_Financial_Reporting_Requirement_on_Formalizing_Small_and_Medium_Enterprises_in_Kenya.pdf
    Download Restriction: no
    File URL: http://hrmars.com/hrmars_papers/Influence_of_Financial_Reporting_Requirement_on_Formalizing_Small_and_Medium_Enterprises_in_Kenya.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thorsten Beck, 2015. "Cross-Border Banking and Financial Deepening: The African Experience," Journal of African Economies, Centre for the Study of African Economies, vol. 24(suppl_1), pages 32-45.
    2. Gemechu Ayana Aga & Barry Reilly, 2011. "Access to credit and informality among micro and small enterprises in Ethiopia," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(3), pages 313-329.
    3. Joshi, Anuradha & Prichard, Wilson & Heady, Christopher, 2013. "Taxing the Informal Economy: Challenges, Possibilities and Remaining Questions," Working Papers 11257, Institute of Development Studies, International Centre for Tax and Development.
    4. Dowla, Asif, 2006. "In credit we trust: Building social capital by Grameen Bank in Bangladesh," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(1), pages 102-122, February.
    5. Joshi, Anuradha & Prichard, Wilson & Heady, Christopher, 2012. "Taxing the Informal Economy: Challenges, Possibilities and Remaining Questions," Working Papers 2309, Institute of Development Studies, International Centre for Tax and Development.
    6. Gustavo Henrique de Andrade & Miriam Bruhn & David McKenzie, 2016. "A Helping Hand or the Long Arm of the Law? Experimental Evidence on What Governments Can Do to Formalize Firms," The World Bank Economic Review, World Bank, vol. 30(1), pages 24-54.
    7. Pietro Calice & Victor M. Chando & Sofiane M. Sekioua, 2012. "Working Paper 146 - Bank Financing to Small and Medium Enterprises in East Africa: Findings of a Survey in Kenya, Tanzania, Uganda and Zambia," Working Paper Series 377, African Development Bank.
    8. William R. Kerr & Ramana Nanda, 2009. "Financing Constraints and Entrepreneurship," Harvard Business School Working Papers 10-013, Harvard Business School.
    9. Mr. Emilio Sacerdoti, 2005. "Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies," IMF Working Papers 2005/166, International Monetary Fund.
    10. Mary Njeri Kinyanjui, 2008. "From home to jua kali enterprise spaces: entrepreneurship and female gender identity," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 5(3/4), pages 401-411.
    11. Roger B. Myerson, 2012. "A Model of Moral-Hazard Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 120(5), pages 847-878.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Amadou Boly, 2015. "On the benefits of formalization: Panel evidence from Vietnam," WIDER Working Paper Series 038, World Institute for Development Economic Research (UNU-WIDER).
    2. Jozef Pacolet & Joris Vanormelingen, 2015. "Illicit Financial Flows: concepts and first macro estimates for Belgium and its 18 preferred partner countries," BeFinD Working Papers 0110, University of Namur, Department of Economics.
    3. Kohler, Pierre, 2014. "Asset-Centred Redistributive Policies for Sustainable Development," MPRA Paper 55357, University Library of Munich, Germany.
    4. Milo Bianchi, 2012. "Financial Development, Entrepreneurship, and Job Satisfaction," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 273-286, February.
    5. Panicos Demetriades & David Fielding, 2012. "Information, Institutions, And Banking Sector Development In West Africa," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 739-753, July.
    6. Sorin Gabriel Anton & Ionel Bostan, 2017. "The Role of Access to Finance in Explaining Cross-National Variation in Entrepreneurial Activity: A Panel Data Approach," Sustainability, MDPI, vol. 9(11), pages 1-16, October.
    7. Blessing Atwine & Ibrahim Mike Okumu & John Bosco Nnyanzi, 2023. "What drives the dynamics of employment growth in firms? Evidence from East Africa," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-25, December.
    8. William R. Kerr & Ramana Nanda, 2010. "Banking Deregulations, Financing Constraints, and Firm Entry Size," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 582-593, 04-05.
    9. Chen, Shenglan & Ma, Hui & Teng, Haimeng & Wu, Qiang, 2022. "Banking liberalization and corporate tax planning: Evidence from natural experiments," Journal of Corporate Finance, Elsevier, vol. 76(C).
    10. Farla, Kristine, 2012. "Institutions and credit," MERIT Working Papers 2012-038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. Soumyananda Dinda, 2014. "Inclusive growth through creation of human and social capital," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 41(10), pages 878-895, October.
    12. repec:thr:techub:10019:y:2021:i:1:p:607-630 is not listed on IDEAS
    13. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.
    14. Jeffrey J. Burks & Christine Cuny & Joseph Gerakos & João Granja, 2018. "Competition and voluntary disclosure: evidence from deregulation in the banking industry," Review of Accounting Studies, Springer, vol. 23(4), pages 1471-1511, December.
    15. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    16. Sugata Marjit & Lei Yang & Moushakhi Ray, 2014. "Credit constraints, fragmentation, and inter-firm transactions," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 21(1), pages 94-103, March.
    17. Ben Amoako-Adu & Joseph Eshun, 2018. "SME Financing in Africa: Collateral Lending vs Cash Flow Lending," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(6), pages 151-159, June.
    18. Ilmiawan Auwalin, 2021. "The effect of a credit policy change on microenterprise upward transition and growth: evidence from Indonesia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 611-636, December.
    19. Boasiako, Kwabena Antwi & Adasi Manu, Sylvester & Antwi-Darko, Nana Yaw, 2022. "Does financing influence the sensitivity of cash and investment to asset tangibility?," International Review of Financial Analysis, Elsevier, vol. 80(C).
    20. Michalski, Tomasz & Ors, Evren, 2012. "(Interstate) Banking and (interstate) trade: Does real integration follow financial integration?," Journal of Financial Economics, Elsevier, vol. 104(1), pages 89-117.
    21. Farazi, Subika, 2014. "Informal firms and financial inclusion : status and determinants," Policy Research Working Paper Series 6778, The World Bank.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hur:ijarbs:v:7:y:2017:i:7:p:83-100. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hassan Danial Aslam (email available below). General contact details of provider: http://hrmars.com/index.php/pages/detail/IJARBSS .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.