The Effect of Transaction Cost on the Performance of SMEs in Kenya

Abdikadir Noor Fidow; Selefano Odoyo; Francis Wambalaba

doi:doi:10.11648/j.ijafrm.20220701.12

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The Effect of Transaction Cost on the Performance of SMEs in Kenya

Abdikadir Noor Fidow, Selefano Odoyo, Francis Wambalaba

Published in International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 1)

Received: 26 January 2022 Accepted: 11 February 2022 Published: 9 March 2022

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Abstract

The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R²=0.228), f(6, 205)=2.181, p< .05, ROA explained 18.0%, (R²=0.180), f(6, 204)=2.904, p< .05, while sales growth explained 14.7% (R²=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 1)
DOI	10.11648/j.ijafrm.20220701.12
Page(s)	11-19
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Transaction Cost, Information Technology, Asymmetry of Information

References

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APA Style

Abdikadir Noor Fidow, Selefano Odoyo, Francis Wambalaba. (2022). The Effect of Transaction Cost on the Performance of SMEs in Kenya. International Journal of Accounting, Finance and Risk Management, 7(1), 11-19. https://doi.org/10.11648/j.ijafrm.20220701.12

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ACS Style

Abdikadir Noor Fidow; Selefano Odoyo; Francis Wambalaba. The Effect of Transaction Cost on the Performance of SMEs in Kenya. Int. J. Account. Finance Risk Manag. 2022, 7(1), 11-19. doi: 10.11648/j.ijafrm.20220701.12

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AMA Style

Abdikadir Noor Fidow, Selefano Odoyo, Francis Wambalaba. The Effect of Transaction Cost on the Performance of SMEs in Kenya. Int J Account Finance Risk Manag. 2022;7(1):11-19. doi: 10.11648/j.ijafrm.20220701.12

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@article{10.11648/j.ijafrm.20220701.12,
  author = {Abdikadir Noor Fidow and Selefano Odoyo and Francis Wambalaba},
  title = {The Effect of Transaction Cost on the Performance of SMEs in Kenya},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {7},
  number = {1},
  pages = {11-19},
  doi = {10.11648/j.ijafrm.20220701.12},
  url = {https://doi.org/10.11648/j.ijafrm.20220701.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220701.12},
  abstract = {The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R2=0.228), f(6, 205)=2.181, p2=0.180), f(6, 204)=2.904, p2=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.},
 year = {2022}
}

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TY  - JOUR
T1  - The Effect of Transaction Cost on the Performance of SMEs in Kenya
AU  - Abdikadir Noor Fidow
AU  - Selefano Odoyo
AU  - Francis Wambalaba
Y1  - 2022/03/09
PY  - 2022
N1  - https://doi.org/10.11648/j.ijafrm.20220701.12
DO  - 10.11648/j.ijafrm.20220701.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 11
EP  - 19
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20220701.12
AB  - The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R2=0.228), f(6, 205)=2.181, p2=0.180), f(6, 204)=2.904, p2=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.
VL  - 7
IS  - 1
ER  -

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Author Information

Abdikadir Noor Fidow

School of Business, United States International University-Africa (USIU), Nairobi, Kenya
Selefano Odoyo

School of Business, United States International University-Africa (USIU), Nairobi, Kenya
Francis Wambalaba

School of Business, United States International University-Africa (USIU), Nairobi, Kenya

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Plain Text BibTeX RIS

APA Style

Abdikadir Noor Fidow, Selefano Odoyo, Francis Wambalaba. (2022). The Effect of Transaction Cost on the Performance of SMEs in Kenya. International Journal of Accounting, Finance and Risk Management, 7(1), 11-19. https://doi.org/10.11648/j.ijafrm.20220701.12

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ACS Style

Abdikadir Noor Fidow; Selefano Odoyo; Francis Wambalaba. The Effect of Transaction Cost on the Performance of SMEs in Kenya. Int. J. Account. Finance Risk Manag. 2022, 7(1), 11-19. doi: 10.11648/j.ijafrm.20220701.12

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AMA Style

Abdikadir Noor Fidow, Selefano Odoyo, Francis Wambalaba. The Effect of Transaction Cost on the Performance of SMEs in Kenya. Int J Account Finance Risk Manag. 2022;7(1):11-19. doi: 10.11648/j.ijafrm.20220701.12

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@article{10.11648/j.ijafrm.20220701.12,
  author = {Abdikadir Noor Fidow and Selefano Odoyo and Francis Wambalaba},
  title = {The Effect of Transaction Cost on the Performance of SMEs in Kenya},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {7},
  number = {1},
  pages = {11-19},
  doi = {10.11648/j.ijafrm.20220701.12},
  url = {https://doi.org/10.11648/j.ijafrm.20220701.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220701.12},
  abstract = {The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R2=0.228), f(6, 205)=2.181, p2=0.180), f(6, 204)=2.904, p2=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.},
 year = {2022}
}

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TY  - JOUR
T1  - The Effect of Transaction Cost on the Performance of SMEs in Kenya
AU  - Abdikadir Noor Fidow
AU  - Selefano Odoyo
AU  - Francis Wambalaba
Y1  - 2022/03/09
PY  - 2022
N1  - https://doi.org/10.11648/j.ijafrm.20220701.12
DO  - 10.11648/j.ijafrm.20220701.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 11
EP  - 19
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20220701.12
AB  - The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R2=0.228), f(6, 205)=2.181, p2=0.180), f(6, 204)=2.904, p2=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.
VL  - 7
IS  - 1
ER  -

Copy | Download