Firm Performance As A Determinant Of New Equity Issuance Among Registered Dairy Firms In Nandi County, Kenya

Abstract

Dairy companies in Nandi County have been created under the premise of success considering that they are established in a Milk producing County. The companies therefore are usually keen to expand their business operations to tap into the vast market in the County. This expansion has a direct effect on the need for additional capital. This capital however is not always available. The general objectives of the study were to analyze the effects of performance on new equity issuance among registered dairy firms in Nandi County. The study was guided by the following specific objectives; to investigate the effects of profitability on issuance of new equity; to assess how market share affects issuance of new equity in the Dairy Sector in Nandi County; to determine the effects of liquidity on issuance of new equity and to analyze the effects of assets base on the issuance of new equity in the Dairy Sector in Nandi County. A descriptive survey research design was adopted for this study. The study targeted all the registered dairy firms in Nandi County. The study used primary and secondary data. Data was analyzed using the descriptive statistics and inferential statistics. The analysis was also done using a regression model. The study adopted both the qualitative and quantitative analysis in order to achieve the objective of the study. The study findings revealed that there was a significant relationship (p=0.000) between profitability and issuance of new equity, there was no significant relationship between market shares (p=0.378) and new equity issuance, there was no significant relationship between liquidity (p=0.881) and new equity issuance and there was no significant relationship between asset base (p=0.251) and new equity issuance. The study concluded that the dairy firms consistently posted profitable returns in all the four quarters of the year, the dairy firm serves a larger catchment area, the firm is able to meet its financial obligations in time and fixed assets are acquired by the firm more frequently. The study recommended that the firms need to increase the rate of dividends when profits are made and for the dairy firms to set achievable selling targets in selling their products.