Moderating Effect of Legislation on Relationship between Membership Diversity and Financial Performance of Agricultural Cooperatives in Kenya

This study explored the impact of membership diversity on the financial performance of agricultural cooperatives, as well as the moderating role of legislation in this relationship. Using a quantitative research design, the study analyzed data from 31 cooperatives in Kiambu and Kajiado counties, involving 57,640 members over a five-year period (2019–2023). Regression analysis revealed that membership diversity had a significant positive influence on financial performance. Specifically, 3.1% of the variation in financial performance was explained by diversity, with an R-value of 0.176 and an R Square of 0.031. The ANOVA results, with an F-value of 12.772 and a p-value of 0.000, confirmed the statistical significance of this relationship. The study further examined whether existing legislation moderated the relationship between diversity and financial performance. Although the moderation model showed a slight increase in explanatory power (R Square = 0.040, R-value = 0.201), the effect was relatively limited. ANOVA results still showed statistical significance (F-value = 16.889, p = 0.000), suggesting that legislation does influence the relationship to a small extent. Overall, the findings suggest that while legislation plays a modest role in enhancing the diversity-performance link, membership diversity alone is a strong and direct driver of financial success in agricultural cooperatives. This has important implications for cooperative leaders and policymakers, emphasizing the value of fostering diverse membership as a strategy for improving financial outcomes. The study contributes to a better understanding of how internal cooperative dynamics and external regulatory environments interact to affect organizational performance.