Financial literacy, managerial tenure and investment decisions of food and beverage manufacturing companies in kenya

Abstract

The food and beverages manufacturing sector in Kenya has shown a downward trend, with businesses exposed to significant risks and excessive debt compared to their asset base due to poor investment decisions. Two out of every five manufacturing companies in fail within two to three years after being formed. Financial literacy plays critical role in ensuring that one is equipped with knowledge and skills needed to manage finances to help companies realize financial stability and make informed financial decisions. The general objective of the study was to assess the moderating role of managerial tenure on the relationship between financial literacy and investment decision of Food and Beverage Manufacturing companies in Kenya. The specific objectives were to evaluate the effect of rational factors literacy, financial analytical skills, irrational factor management skills and past performance awareness of food and beverage manufacturing companies Kenya. The Decision Theory, Upper Echelons Theory and Prospect theory guided the study. The Anchor Theory was the Upper Echelons Theory. An explanatory research design was employed. The study employed census sampling technique which consisted of 250 Chief Finance Officers derived from Food and Beverage companies registered with Kenya Association of Manufacturers. The study employed descriptive survey sampling technique to select the respondents. This study used primary data, a structured questionnaire was administered to respondents. Items were measured using a 5 point Likert Scale ranging (1-5). Pilot study was done in Nyanza region covering 15 Chief Finance Officers working for registered food and beverages manufacturing companies. Validity and reliability was tested and the data collected was analyzed using Statistical techniques, which included frequencies, mean, standard deviation. Hierarchical moderated regression analysis was employed and descriptive and inferential statistics were derived. Data was presented in tables. The regression results demonstrated a significant positive impact of rational factors (β=0.245, p=0.00), financial analytical skills (β=0.607, p=0.000), irrational factors management (β=0.379, p=0.000), past performance management (β=0.319, p=0.000) on investment decisions. The study revealed a significant positive moderating effect of rational factors (β=0.034, p=0.001), irrational factors management (β= 0.136, p=0.000), past performance awareness (β= 0.079, p=0.000) and investment decisions. The study unveiled a significant negative moderating effect of financial analytical skills and investment decisions (β= -0.053, p=0.000). The study concluded that Enhancing financial literacy, and leveraging managerial tenure can lead to informed investment decisions and organizational success. The study recommended that investors should offer competitive compensation packages, provide opportunities for career advancement, promote use of data analytics, focus on retaining experienced Managers and conduct performance evaluation. Finally, the study's findings aligned with Upper Echelons Theory, Decision Theory, and Prospect Theory, emphasizing the influence of managerial background, rational decision-making, and perception of gains and losses on investment decisions .