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    Analysis of the Related Party Transactions in terms of managerial and financial issues for the Kenyan Savings and Credit Cooperatives
    (International Journal of Finance & Banking Studies, 2021-09) Nguta, Munene Halldess; Mugambi, Ken
    Related party transactions are a key factor to the sustainability of Savings and Credit Cooperatives (SACCOs). In view of this fact, loans to directors and staff are viewed as a factor which can greatly influence savings and credit cooperatives into either falling into financial distress or helping them to remain a float and become financially stable entities. The stakeholder theory holds that entities should be managed a manner that will satisfy every stakeholder. The stewardship theory reiterates that managers have the organisation at heart and can it to profitability as if it were their own. However approval of loans and other transactions to managers and staff, may not positively impact the entity. This study was designed to establish the effect of related party transactions on the relationship between board characteristics and financial distress of deposit taking SACCOs in Nairobi County. We applied Descriptive research design on Deposit taking SACCOs in Nairobi County which was identified purposively while a census was conceded for all deposit taking SACCOs in the county. We obtained secondary data from SASRA using a data collection sheet after which we performed panel data analysis by use of STATA software. Findings were presented using tables. The study concluded that related party transactions influenced the relationship between board characteristics and financial distress of Deposit Taking SACCOs in Nairobi County. Related party transactions can be an avenue of causing financial distress and should be kept as low as possible. The regulator should come up with a tool based on Altman’s Z score models to predict financial distress in SACCOs in order to offer timely advice to alleviate more distress and consequent bankruptcy which may lead to closure of SACCOs. Another research may be carried out to establish other factors causing financial distress and how to turn around the SACCOs already in distress.
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    The Mediating Effect of Firm Revenue on the Relationship Between Board Characteristics on Financial Distress of Deposit Taking Saccos in Nairobi County, Kenya
    (International Journal of Finance & Banking Studies, 2021-09) Nguta, Munene Halldess; Ndegwa, James
    The upper Echelons Theory reiterates the importance of top management in an organization and recognizes that the mangers make decisions that grow the entity. Before the establishment of this theory, the premise was that larger firms which drive high amounts of income, are capable of running themselves without failure. Although Organizations that command large amounts of income are deemed to be successful the upper echelons theory holds that these entities cannot be successful without proper management and guidance by top management where the board of directors in this case is considered as top management organ for SACCOs. Savings and Credit Cooperatives (SACCOs) require good governance to avoid the experience of financial distress. The current research was therefore aimed at establishing the influence of firm revenue on the relationship between board characteristics and financial distress of deposit taking SACCOs in Nairobi County. Large entities command more revenue as compared to small firms. Board Characteristics is of importance to this study because it influences Corporate Governance which according to previous research has shown that the practice helps revolutionize performance of various institutions. The study is guided by upper echelons theory which reiterates the importance of top management. Descriptive research design was adopted while Nairobi County was purposively chosen and a census was carried out on deposit taking SACCOs in the county. Secondary data was collected from SASRA using a data collection sheet and a panel data analysis performed using STATA software and findings were presented using tables. The study concluded that firm revenue does not mediate the relationship between board characteristics and financial distress of Deposit Taking SACCOs. Though firm revenue should be enhanced, governance should be improved since it remains a critical success factor in alleviation of financial distress.