Effect Of Funding Structure And Liquidity On The Financial Performance Of The Sugar Industry In Kenya

The main aim of this study was to determine the effect of funding structure on the financial performance of the sugar industry in Kenya. The relationship between funding structure and financial performance is crucial within Kenya's sugar industry, as it directly impacts resource allocation, expense management, and overall profitability. Inadequate financial management can result in liquidity challenges, affecting the sector's competitiveness and sustainability. Conversely, a well-balanced funding structure, incorporating both debt and equity, has the potential to strengthen financial stability. Stockholder, Trade-offs, and Pecking order guided the study. The study employed a correlational research design. The study's target population consisted of 16 sugar companies operational in Kenya. Purposive sampling was used to select 9 sugar companies. A total of 324 secondary data points from 2014 to 2022 were collected, including the cost of equity, debt, retained earnings, and economic value added, derived from financial statements and cash flows. The results showed a significant positive relationship between funding structure and Economic value added (coeff=0.863126, p=0.000<0.005). This reveals that Companies that maintain an appropriate funding structure are more likely to achieve higher Economic Value Added (EVA) over the long run. Given the positive long-term correlation between funding structure and EVA, it can be inferred that Kenyan sugar companies should prioritize maintaining a balanced funding structure to improve financial performance. The study concludes that funding structure has a significant relationship with economic value added