Capital Allowance and Financial Performance of Manufacturing Firms

Purpose: The main objective of this study was to examine the effect of capital allowance on the financial performance of manufacturing firms in Nyeri County Methodology: A descriptive research design was adopted. In this study, the population comprised all the 15 manufacturing firms in Nyeri County that are registered by the Nyeri County finance department; licensing office 2023. The study used census methods to acquire information from finance managers, tax managers, and senior managers of the targeted manufacturing firms. To gather primary data, questionnaires with Likert scales were used. The study collected secondary data from the manufacturing firms' internal sources for six years. The researcher utilized descriptive statistics, including measures like the mean, standard deviation, and frequency, to analyse the data. Additionally, the study employed Pearson correlation and regression analysis to investigate the relationship between the variables and ascertain whether the independent variables could predict the dependent variable in the study. The program Statistical Package for Social Sciences (SPSS) was used to analyze the data. Data was presented in the form of tables and graphs. Findings: The study findings established that there exists a significant relationship between capital allowance and the financial performance of manufacturing firms in Nyeri County. Capital Allowance emerged as a crucial predictor of financial performance (Beta = 0.766. Participants expressed a positive perception regarding the influence of capital allowances on their respective firms' financial performance, with strong agreement on investment deductions, wear and tear allowance, capital allowance incentives, and overall satisfaction with the current level of capital allowances. Unique Contribution to Theory, Practice, and Policy: The study was anchored on tax discrimination theory to show the effect of capital allowance on the financial performance of manufacturing sectors. The study recommended that there is a need to maintain and even improve capital allowance laws to meet taxpayers' demands and expectations and encourage investment.