Fiscal policy changes and financial performance of tea factories in Mount Kenya region, Kenya

Abstract

This study aimed to assess the impact of fiscal policy changes on the financial performance of tea factories in the Mt. Kenya Region in Kenya. Despite the significant role of tea factories in the economic development of the country, their financial performance has always been determined by external pressure, including government tax reforms. To achieve the study’s main purpose, the researcher adopted specific objectives on fiscal policy changes, namely: taxation policy, social health insurance fund contribution, and national social security fund contribution policy regulations, and their impact on the financial performance of tea factories. This study was anchored on key theoretical foundations, particularly the institutional theory, public choice theory, and the Extended Life-Cycle Theory. The study adopted a descriptive research design as the approach to guide the research. Further, the target population included all 37 tea factories in the Mt. Kenya region, with primary data collected from 185 purposively selected participants, consisting of 5 finance and operations officers from each factory. Therefore, the study adopted a census due to the small size of the population. The researcher collected quantitative data from the participants using a closed structured questionnaire. The collected data was sorted, cleaned, and coded for data analysis using the STATA computer programming software. The study employed both descriptive and inferential statistics in analysing the data to draw insights into the study variables. The study findings showed that taxation policy changes and national social security fund policy had a positive and significant effect on financial performance of tea factories. However, the study findings showed a contrary picture on the social health insurance fund policy by indicating despite it had a positive effect, the effect was not significant in predicting the financial performance of tea factories. Despite these key findings, the study recommends further research focusing only on social health insurance funds to provide a wider scope of the findings to affirm the insignificant findings. Further, the study recommends similar studies be done with a longitudinal approach to incorporate the time effect on the relationship between the fiscal policy changes and financial performance of tea factories in Mt. Kenya.