Title:
Effect of Financial Management Practices on Performance of Commercial State-owned Enterprises in Kenya: A Machine Learning Approach

Authors:
Bethsay J. Kaino, Prof. David N. Kiragu, Dr Njenga Mburu, Kenya

Abstract:

State owned enterprises (SOEs) play a significant role in most global economies, serving as key drivers of economic growth and addressing market failures.  They also support the government broader agenda of improving the citizens quality of live across the key domains of United Nations 17 Sustainable development goals (SDGs), Africa Agenda 2063; the “prosperous Africa that we want”, Kenya Vision 2030; “transforming the County in key Social, economic and Political spheres”, and the 2022-2030 government agenda focusing on “five priority areas of social economic transformation of Kenya by 2030.  However, approximately 70% of these commercial SOEs are loss making despite being in key sectors. The objective this study was to examine the effect of financial management practices on SOE’s performance in Kenya. The study applied a post- positivism research philosophy and a cross-section approach to descriptive research design.  The sampling frame and unit of analysis was the 41 commercial state-owned enterprises in Kenya. The unit of response was 205 managers of the SOEs. A closed ended questionnaire was used to collect primary data for the predictor and a secondary data collection sheet for the target variable. Kaiser-Meyer-Olkin (KMO) coefficient and Bartlett’s Chi-Square from Confirmatory Factor Analysis were used to enhance construct validity. Ordinary Least Squares was used for inferential analysis after testing the data for Gaussian distribution, linearity and autocorrelation. The study found that 62.8% of the variations in SOEs performance could be explained by financial management practices and that there is a statistically significance influence of these practices on SOEs performance. These findings imply that departing from best practices in financial management practices can have a significant effect on SOE performance. Risk management policy, risks assessments, risk appetite thresholds, risk monitoring & reporting and comprehensiveness of internal financial controls are also elastic to these practices.  This study recommends a focussed approach to the review and harmonization of policy/ies driving these financial management practices at entity level and attention to utilisation of technology in financial management processes so as to drive strategic performance.

DOI: https://doi.org/10.51505/IJEBMR.2025.9117