Relationship between Financial Management Practices and Financial Stability of Football Clubs in Kenya. A Survey of Football Clubs at the Kenya Premier League

Abstract

This research investigated whether there exists an association between the financial management practices put in place by the Kenyan football clubs and their financial stability. The specific research objectives guided the study by establishing the influence of investment practices, financial reporting framework, working capital management and financing activities on stability of football clubs in Kenya. The underpinning theories include: Agency theory, game theory in sports and contracting theory. Explanatory research design was adopted. Questionnaires were used to collect data. The target population comprised of sixty-three respondents from twenty-one football clubs that were participating between 2010-2014 seasons of the Kenyan Premier League. The respondents comprised financial officers, the chairpersons, and accountants at the clubs. Purposive sampling as well as simple random sampling were adopted to select the respondents. Yamane (1967) formula which is used to calculate sample sizes at 95% confidence level and e = 0.05 was used to obtain the sample size. The total number of respondents was fifty-four (54). Descriptive statistics and inferential statics were used in data analysis. From the research it was established that with well laid financial management practices, there exists significant influence on the financial stability of football clubs. The research concludes football clubs have the capacity to improve their performance both by winning matches as well as enhancing their financial capability through embracing standard financial management structures and thereby leading to financial stability. The research recommends that for the clubs to succeed, pro-active and innovative measures must be put in place. Football academies that train young footballers should be established. This would ensure supply of senior players to the football clubs hence reducing cost of player recruitment while also maintaining high level of competitiveness. Football clubs should ensure that financial reporting is enhanced at all times. Qualified staff with competitive salary packages should be employed to ensure credibility of financial reports. The management should be in a position to analyze the financial reports for financial decision making. Automation of accounting systems has proved to enhance efficiency, security and credibility of accounting information generated. Football clubs should embrace this technology to enable them monitor at all levels the expenses, flow of cash and proceeds generated. More research needs to be undertaken on other financial aspects affecting the overall performance of football clubs.