Effects of Operating Lease Finance on Financial Performance of Parastatal Sugar Manufacturing Firms in Kenya

Abstract

This study analyses the effect of operating lease finance on financial performance of Parastatal sugar firms in Kenya. The specific objectives were to: find out the effects of operating lease finance on financial performance, determine the relationship between operating lease finance and financial performance. The study used a retrospective research design in collection of data. A target population of all the 4 Parastatal sugar firms was considered in the study. Secondary data was the main source of data. The data was then analyzed using multiple linear regression models and Pearson product moment correlation. The study found that operating lease finance negatively affects ROA although not statistically significant (β -.451, p<0.05). Operating lease finance was strongly related to financial performance as measured by ROA. The conclusions of the study were that operating lease finance negatively affects firm performance although not statistically significant. The study recommended that Parastatal sugar firms should reduce the proportion of operating lease finance in their capital structure as it negatively affects financial performance.

Key words: Operating lease finance, ROA, ROE