Organizational Structure and Financial Performance of Investment Groups Participating in Kenyan Capital Markets

Abstract

The idea behind collective investment through group formation has shape the investment growth in Kenya. Individuals come together to form homogeneous or heterogeneous groups to enable them raise adequate investment capital. They invest in an array of assets and portray different financial performance. However, there is scanty evidence on how the form in which an investment group is organized affects its financial performance. Therefore, the objective of the study was to assess the effect of organizational structure on the financial performance of investment groups in Kenya which invests in capital market securities. Descriptive survey design was used and stratified and simple random sampling techniques were used to select a sample of 130 investment group members and 130 investment groups, which invest in capital markets. Data was analyzed using both descriptive and inferential statistics. The results indicated that group organizational structure generally positively and significantly affects financial performance of investment groups in Kenya. The group organization structure dimensions having a significant positive effect on group financial performance were organization form, financial management, accounting and auditing. The study recommends that policies should be created to encourage incorporation and formalization of investment groups as a strategy to spruce up their financial performance. Registrar of groups should insist on registration only for groups which are registered for tax and with articles and memorandum of associations detailing clear rules for joining, exit and sharing of group profits.

Keywords: Investment Group Organization Structure, Group Financial Performance, Chama Investments, Kenya Association of Investment Groups.

DOI: 10.7176/JPID/54-05

Publication date:May 31^st 2020