Does Transactional Leadership Style Moderate the Relationship Between Financial Literacy and Financial Growth? Insight and Impact in Micro, Small and Medium Enterprises in Kenya
Main Article Content
Keywords
Financial literacy, transactional leadership style, financial growth, Micro, Small and Medium Enterprises, South Rift
Abstract
MSMEs boost global economic growth, poverty reduction, and job creation. Kenyan MSMEs face credit, financial literacy, regulatory compliance expenses, and leadership issues despite government involvement. The general purpose of this study was to establish moderating effect of transactional leadership style on financial determinants and financial growth of MSMEs in South-Rift Region, Kenya. The study specific objectives were; to examine the effect of access to credit, financial literacy and regulatory compliance costs on the financial growth of MSMEs. The study was guided by Resource Dependency and Transaction Cost Theory. Explanatory research design was adopted and the unit of observation were the registered MSMEs. Stratified, proportional, and simple random sampling techniques were used to select 394 respondents from a target population of 25,343. Primary data was collected using close ended questionnaires. A pilot study was conducted in Kisii County using 10% of the sample size. Validity of the instruments was carried out using Factor analysis and Correlation, while reliability was tested using Cronbach's Alpha. Data analysis involved use of both descriptive and inferential statistics. Inferential statistics used correlation and hierarchical moderating regression analysis, whereas descriptive used frequency, mean, standard deviation, and percentages. The study results indicated that the association between financial literacy and financial growth was positive and significant (r =0.324, p = 0.01). The association between transactional leadership style and financial growth was positive and statistically significant (r = 0.618, p = 0.01). A statistically significant effect of financial literacy on the financial growth of MSMEs (β = 0.131, ρ<0.05) was established. Consequently, it can be inferred that financial literacy has an effect on the financial growth of MSMEs. The results further indicate that the interaction effect between financial literacy, transactional leadership and financial growth in MSMEs was positively and significantly influenced by the interaction effect of transactional leadership (β = 0.212, ρ<0.05). The study concludes that transactional leadership moderates the relationship between financial literacy and the financial growth of MSMEs. The study findings contribute to extant literature by demonstrating that financial literacy and transactional leadership jointly influence the growth of MSMEs, a combined effect not previously documented. Financial literacy and leadership training are especially recommended for MSME owners and managers to boost sustainable growth. Financial literacy and leadership frameworks, which enable MSMEs' growth, should be promoted by government and financial sector policies.
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Published
Nov 11, 2024
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Sigei , W. K., Chelogoi , S., & Sang , J. (2024). Does Transactional Leadership Style Moderate the Relationship Between Financial Literacy and Financial Growth? Insight and Impact in Micro, Small and Medium Enterprises in Kenya. Journal of Business, Economics and Management Research Studies, 2(3), 143–163. https://doi.org/10.69897/jobemrs.v2i3.168
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Author Biographies
Wilbon Kiptoo Sigei , Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Kesses, Eldoret, Kenya
Department of Accounting and Finance, School of Business and Economics, Moi University, Kenya
Stephen Chelogoi , Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Kesses, Eldoret, Kenya
Department of Accounting and Finance, School of Business and Economics, Moi University, Kenya
Jane Sang , Department of Management Science & Entrepreneurship, School of Business and Economics, Moi University, P.O. Box 3900, Kesses, Eldoret, Kenya
Department of Management Science & Entrepreneurship, School of Business and Economics, Moi University, Kenya