EFFECT OF CUSTOM DUTY INCENTIVES ON FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN KENYA
Abstract
Background: The purpose of the study was to assess the effect of custom duty incentives on the financial performance of manufacturing firms in Kenya. The study focused on the manufacturing companies registered by Kenya Association of Manufacturers. Materials and Methods: The population of the study was the 447 manufacturing companies in the register of Kenya Association of Manufacturers in 2019. The study applied a stratified random sampling technique in the determination of the sample size, where 211 manufacturing companies were selected for the study. Primary data was collected by the use of questionnaires targeting accountants and other senior management officers in manufacturing companies. Secondary data was collected from audited financial statements covering a period of 10 years from 2009 to 2018. The response rate on the questionnaires was 73.5 %. Data analysis was performed by use of SPSS version 25. The study performed both descriptive and inferential statistics, diagnostic tests involving multi-collinearity tests, auto-correlation, heteroscedasticity and test of normality were carried out. Results: The data did not suffer from multi-collinearity neither was there auto-correlation; however, the data violated the assumption of normality. The study applied ordinal regression analysis so as to determine the predictive model. Pseudo-R square was computed which showed that custom duty incentives explain 4% of the change in financial performance meaning there are other factors that contribute to the change in financial performance. The results of the study also showed that custom duty incentive has a statistically significant relationship with the financial performance of manufacturing companies. Conclusion: The conclusion of the study was custom duty contributes positively to the financial performance of manufacturing companies in Kenya. The study recommended that manufacturing companies should embrace the aspects of custom duty incentives offered by the government.
JEL: L10; L20; L60
Article visualizations:
Keywords
Full Text:
PDFReferences
Assidi, S., Aliani, K., & Omri, M.A. (2016). Tax optimization and the firm's value: Evidence from the Tunisian context. Borsa Istanbul Review, 16(3), 177 – 184.
Cooper, D. R., & Schindler, P. S. (2011). Business research methods (11 ed.). Boston: McGraw-Hill.
Holland, D., & Vann, R. (1998). Chapter 23. Tax law design and drafting. In V. Thuroyi (Ed.). Income tax incentives for investment (pp. 789-867). IMF
IEA. (2012). taxation in Kenya - Institute of Economic Affairs. Retrieved from Institute of Economic Affairs: https://www.ieakenya.or.ke/downloads.php?page=Tax-Handbook.pdf.
Jacques, M., & Neda, P. (2004). How Tax Policy and Incentives Affect Foreign Direct Investment. World Bank Policy Research Working Paper No. 250,56-59.
Joosung, J. (2017). Tax Incentives and Tax base protection in developing countries. United Nations. Retrieved June 17, 2019, from https://www.unescap.org/sites/default/files/S3_Tax-Incentives-and-Tax-Protection-Base.pdf
KNBS. (2018). Economic Survey. Nairobi: Kenya National Bureau of Statistics.
Kuria, J. N. (2018). Effects of Tax Incentives on the Performance of Export Processing Zone Firms in Kenya. Retrieved from http://usiu.ac.ke.erepo.usiu.ac.ke/11732/3650
Pham, A. (2015). A temporary corporate income tax reduction and its effects on firm behavior: A case study of Vietnam. (Unpublished Dissertation, George Mason University, USA).
Ohaka, J., & Dagogo, D. W. (2015). Re-investment allowance, investment tax credit, and the reality of corporate cash flow in Nigeria. Journal of Economics and Finance, 6(2).
Olaleye, M. O. (2016). Effects of Tax Incentives on Foreign Direct Investment in Listed Nigerian Manufacturing Companies. Retrieved from JKUAT Repository: http://hdl.handle.net/123456789/2186
DOI: http://dx.doi.org/10.46827/ejefr.v6i4.1366
Refbacks
- There are currently no refbacks.
Copyright (c) 2022 Gideon M. Mwangi, Robert Gitau
This work is licensed under a Creative Commons Attribution 4.0 International License.
The research works published in this journal are free to be accessed. They can be shared (copied and redistributed in any medium or format) and\or adapted (remixed, transformed, and built upon the material for any purpose, commercially and\or not commercially) under the following terms: attribution (appropriate credit must be given indicating original authors, research work name and publication name mentioning if changes were made) and without adding additional restrictions (without restricting others from doing anything the actual license permits). Authors retain the full copyright of their published research works and cannot revoke these freedoms as long as the license terms are followed.
Copyright © 2016 - 2023. European Journal of Economic and Financial Research (ISSN 2501-9430) is a registered trademark of Open Access Publishing Group. All rights reserved.
This journal is a serial publication uniquely identified by an International Standard Serial Number (ISSN) serial number certificate issued by Romanian National Library. All the research works are uniquely identified by a CrossRef DOI digital object identifier supplied by indexing and repository platforms. All the research works published on this journal are meeting the Open Access Publishing requirements and standards formulated by Budapest Open Access Initiative (2002), the Bethesda Statement on Open Access Publishing (2003) and Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities (2003) and can be freely accessed, shared, modified, distributed and used in educational, commercial and non-commercial purposes under a Creative Commons Attribution 4.0 International License. Copyrights of the published research works are retained by authors.
