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The impact of name change on the financial performance of savings and credit co-operatives in Kenya

David Mutua Mathuva (Strathmore Business School, Strathmore University, Nairobi, Kenya)
Elizabeth Wangui Muthuma (Strathmore Business School, Strathmore University, Nairobi, Kenya)
Josephat Mboya Kiweu (School of Management and Commerce, Strathmore University, Nairobi, Kenya)

Management Research Review

ISSN: 2040-8269

Article publication date: 17 October 2016

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Abstract

Purpose

This paper aims to investigate the impact of name change, if any on the financial performance of deposit-taking savings and credit co-operatives (SACCOs) in a developing country characterized by a vibrant SACCO sector. Sparse studies exist on the impact of name changes on revenue-cost performance in mutual financial institutions such as SACCOs.

Design/methodology/approach

The study uses a standard event methodology over a six-year period (2008-2013) to investigate the impact of name change on the return on assets (ROA) and operating profit margin (OPM). The study then uses a panel regression method to study the impact of name change on ROA and OPM for a sample of 212 deposit-taking SACCOs over the period 2008-2013.

Findings

The results, which are robust for a variety of controls, provide evidence in support of a consistent positive association between name change and subsequent financial performance of deposit-taking SACCOs in Kenya. The positive impact of name change seems to be experienced about four years after the name change. The results reveal muted influence of regulation on name change and financial performance of SACCOs in Kenya.

Research limitations/implications

The study focuses solely on deposit-taking SACCOs in a developing country context over a six-year period only. Extending the time period and including a sample of control SACCOs operating purely back-office service activities would add power to the analyses.

Practical implications

The current study illustrates the contribution of name change on the financial performance of SACCOs in a developing country characterized by a vibrant SACCO sector. Overall, the results show that name change announcements signal an improvement in SACCOs’ future prospects.

Originality/value

This study provides empirical evidence on the contribution of name change announcements on the financial performance of SACCOs in a developing country context. The study adds to the sparse literature on the impact of name change on the financial performance of mutual financial institutions that are not listed on the securities exchange.

Keywords

Acknowledgements

The authors wish to thank the officers at the two regulatory bodies, SASRA and the Commissioner of Cooperatives for providing data for this study. The usual disclaimer applies.

Citation

Mathuva, D.M., Muthuma, E.W. and Kiweu, J.M. (2016), "The impact of name change on the financial performance of savings and credit co-operatives in Kenya", Management Research Review, Vol. 39 No. 10, pp. 1265-1292. https://doi.org/10.1108/MRR-04-2015-0097

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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