Effect of Financial Planning on Financial Performance of Parastatals in Mombasa County Kenya

Ali Shukri Hussein and Ogilo Fredrick
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Ali Shukri Hussein: MBA Student University of Nairobi
Ogilo Fredrick: Senior Lecturer University of Nairobi Faculty of Business and Management Science

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 12, 4577-4586

Abstract: The objective of this study was to examine the effect of financial planning on the financial performance of parastatals in Mombasa County, Kenya. Specifically, the study focused on key financial planning components, including resource allocation, financial risk management, budgeting, and investment efficiency, and how these factors influenced financial performance, measured through Return on Assets (ROA). Data for the study was collected using secondary data from 16 parastatals operating in Mombasa County, covering a period of 10 years (2013-2022). The population included all the key parastatals in the county, making it a comprehensive analysis of public sector financial planning and performance. The research employed both descriptive statistics and a regression model to analyze the relationship between the financial planning variables and financial performance. The descriptive analysis revealed significant variability in resource allocation, financial risk management, budgeting, and investment efficiency across the parastatals. Regression analysis indicated that resource allocation was the only variable with a statistically significant effects on financial performance, though the relationship was negative. This suggested that inefficiencies in the use of allocated resources may hinder financial growth. Other variables, such as financial risk management, budgeting, and investment efficiency, did not show statistically significant effects on financial performance, implying that these practices might not be effectively contributing to organizational success. The study concluded that financial planning, particularly resource allocation, plays a crucial role in determining the financial performance of parastatals. However, the negative impact of resource allocation suggests that there are inefficiencies in how funds are being managed and allocated within these organizations. Based on the findings, the study recommended that parastatal managers prioritize improving resource allocation efficiency, strengthening financial risk management practices, enhancing budget execution, and improving investment efficiency to boost financial performance. Additionally, policymakers were urged to develop guidelines that promote better financial management and accountability in public organizations. Future research should expand the scope to include more variables and a larger sample size, providing deeper insights into how financial planning can drive better financial outcomes for public sector organizations.

Date: 2024
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