ISSN 2348-1218 (print) International Journal of Interdisciplinary Research and Innovations ISSN 2348-1226 (online) Vol. 9, Issue 4, pp: (8-13), Month: October - December 2021, Available at: www.researchpublish.com
CRITICAL REVIEW OF LITERATURE ON FIRM CHARACTERISTICS AND FINANCIAL STABILITY OF DEPOSIT TAKING SACCOS IN KENYA Hesborn Birisi1, Ambrose Jagongo PhD2 1
PhD Fellow, Accounting and Finance Department, School of Business, Kenyatta University,
2
Accounting and Finance Department, School of Business, Kenyatta University, P.O. Box 43844-00100, Nairobi, Kenya
Abstract: This study sought to carry out a critical review of literature on firm characteristics and financial stability of Deposit Taking SACCOs in Kenya. It was found that several studies have been done on firm characteristics and financial stability nexus. The studies are however characterized by several research gaps as the studies were largely on other countries and not Kenya. With respect to these research gaps, the study recommends that empirical researches can done on firm characteristics and financial stability of SACCOs in Kenya. Additionally, the moderation effects of the operational environment on the relationship between firm characteristics and financial stability can be examined. Keywords: Firm Characteristics, Operating Environment, Financial Stability and Deposit Taking SACCOs.
1. INTRODUCTION 1.1 Background of the Study Savings and Credit Co-operatives (SACCOs) are user-owned financial institutions that offer both savings and credit services to their members (Alukwe, Ngugi, Ogollah & Orwa, 2015). As such, the terms, SACCO and credit union, refer to the same institutions but are used in different regions of the world. In Kenya, the common term used is SACCO. Over the last decade, regulators of financial institutions have tightened the capital requirement particularly following the 20072009 financial crises. This is because capital has long been recognized as one of the key factors to be considered when the safety and soundness of a particular financial institution is being assessed (Osei-Assibey & Asenso, 2015). Gudmundsson, Ngoka-kisinguh and Odongo (2013) posit that the main reason for the hastened build-up of capital is the perception that stronger financial institutions are likely to withstand financial turbulences and therefore increase financial sector stability. Firm characteristics include characteristics within the firm that determine how a frim allocate resources to generate revenue (Mwangi, Kaijage & Ganesh, 2021). These include firm size, capital structure, efficiency among others. Firm size for instance reflects how large an enterprise is in infrastructure and employment terms. The size of a firm is one of the major drivers of operational costs. Firm size is one of the most influential characteristics in organizational studies. Kellermanns, Walter, Crook, Kemmerer and Narayanan (2016) provides a summary and overview of the importance of firm size. Firm size has also been shown to be related to industry sunk costs, concentration, vertical integration and overall industry profitability. Larger SACCOs are more likely to have more layers of management, greater number of departments, increased specialization of skills and functions, greater centralization and greater bureaucracy than smaller SACCOs. Firm stability refers to the distance of an individual bank from insolvency and failure. Since the onset of the GFC SACCO stability has been at the top of policy makers agenda across advanced and developing countries (Creel, Hubert & Labondance, 2015). Operating environment which is usually determined by macroeconomic policy, gross domestic
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