The Moderating Role of Competitive Aggressiveness on the Relationship Between Short Term Debt and Financial Performance of SMEs in Embakasi East Constituency, Kenya
Main Article Content
Keywords
Short-term debt, financial performance, competitive aggressiveness, SMEs, Embakasi East, moderating effect, Kenya
Abstract
Small and Medium-Sized Enterprises (SMEs) in Kenya face a myriad of challenges, including limited access to financing and information asymmetry regarding available financing options which often leads to poor financial performance. These issues hinder their growth as well as their operational and financial independence. As a result, many SMEs experience high failure rates, raising concerns among policymakers and stakeholders about the sector’s long term contribution to economic development. The main purpose of this study was to investigate the moderating role of competitive aggressiveness on the relationship between short term debt finance and financial performance of SMEs in Embakasi East constituency, Kenya. The study was anchored on Resource Based View Theory and employed explanatory research design. The target population of this study was 9779 SMEs. The study adopted a stratified random sampling technique to obtain a sample size of 309 registered SME owners based on Yamane’s formula. This study adopted structured questionnaires to gather information from respondents selected for the study. To test the reliability of the research instrument, the Cronbach’s alpha test was used. Statistical Package in Social Sciences (SPSS) version 24 was used to analyze data for the study. This study adopted the Hierarchical Multiple Regression model to measure and analyze the interactions between the independent, moderating and dependent variables. The findings revealed a statistically significant moderate positive relationship between short-term debt and financial performance (r = .431, p < 0.01). Competitive aggressiveness also had a significant positive relationship with financial performance (r = .349, p < 0.01), and a weak but significant correlation with short-term debt (r = .130, p < 0.01). The study also established that short term debt (β =-0.257, ρ<0.05) had a significant negative effect on financial performance. Further, the study established that competitive aggressiveness had an enhancing moderating effect on the relationship between short term debt (β = 0.117, p<0.05) and financial performance of SMEs in Embakasi East constituency. The study concludes that aggressive competitive strategies strengthen the financial returns associated with short-term borrowing in SMEs in Embakasi East constituency. The study recommends that policymakers should contemplate implementing measures that enhance the availability of short-term for small and medium sized enterprises (SMEs). This can enable them to leverage the beneficial impact of competitive aggressiveness on financial performance.
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Jul 16, 2025
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Ruttoh , W. K., Chelogoi , S., & Chepkwony, J. (2025). The Moderating Role of Competitive Aggressiveness on the Relationship Between Short Term Debt and Financial Performance of SMEs in Embakasi East Constituency, Kenya. Journal of Business, Economics and Management Research Studies, 3(2), 21–42. https://doi.org/10.69897/jobemrs.v3i2.251
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Author Biographies
Wilson K. Ruttoh , Department of Accounting & Finance, School of Business and Economics, Moi University, P.O. Box 3900-30100, Kesses, Eldoret, Kenya
Department of Accounting & Finance, School of Business and Economics, Moi University, P.O. Box 3900-30100, Kesses, Eldoret, Kenya
Stephen Chelogoi , Department of Accounting & Finance, School of Business and Economics, Moi University, P.O. Box 3900-30100, Kesses, Eldoret, Kenya
Department of Accounting & Finance, School of Business and Economics, Moi University, P.O. Box 3900-30100, Kesses, Eldoret, Kenya
Joel Chepkwony, Department of Marketing & Logistics Management, School of Business and Economics, Moi University, P.O. Box 3900-30100, Kesses, Eldoret, Kenya
Department of Marketing & Logistics Management, School of Business and Economics, Moi University, P.O. Box 3900-30100, Kesses, Eldoret, Kenya