Moderating Effect of Gearing Ratio on the Relationship between Loyalty Programs and Financial Performance of Selected Firms in Service Industry in Kenya

  • John Kiarie St. Paul’s University
  • Dr. Gabriel N. Kirori The Catholic University of Eastern Africa
  • Prof. David Wachira St. Paul’s University

Abstract

The purpose of the study was to determine the moderating effect of gearing ratio on the relationship between loyalty programs and financial performance of selected firms in service industry in Kenya. The study employed explanatory research design which is non-experimental in nature. The target population was three (3) telecommunication firms (Safaricom, Airtel and Telkom Kenya), 49 supermarkets and 46 Five Star hotels. Since the population of telecommunication firms was small, the study used the census survey method. Purposive sampling was used to select 5 big Supermarkets and 16 Five Star hotels. Panel data analysis was used to link the relationship between the variables. Similarly, One-Way ANOVA was used to find out if the financial performance of the three service industries were different. Diagnostic tests which included normality tests, multicollinearity tests, panel unit root tests and fixed and random effect were carried out. The results further showed that gearing ratio have a negative and significant relationship with financial performance of service industry. The regression results revealed that gearing ratio improved the strength of the relationship between loyalty program and Financial Performance of the Selected Firms in Service Industry in Kenya. Since long term debt provides tax shield for the company, there is every tendency for the company to continue to grow debts, the effect of accumulating unnecessary debts should form regular policy discuss by the management and the directors, hence there should be high-powered committees of the managements and the board to review the debt portfolio from time to time. These committees should be firm on investment/divestment of any debt capital to ensure that the company stays afloat all the time without the fear of any litigation for not meeting up with all present and previous obligations.

Key words; Loyalty Programs, Financial Performance, Gearing Ratio & Kenya.

Author Biographies

John Kiarie, St. Paul’s University

Post Graduate Student, The Catholic University of Eastern Africa

Dr. Gabriel N. Kirori, The Catholic University of Eastern Africa

Lecturer, The Catholic University of Eastern Africa

Prof. David Wachira, St. Paul’s University

Lecturer, ST Paul’s University

References

Bwire Z.W. (2016). The Effect of Loyalty Programmes on Financial Performance of Mobile Tele Communication Firms in Kenya. (Doctoral dissertation, School of Business, University of Nairobi).

Corbitt, B. J., Thanasankit, T., & Yi, H. (2003). Trust and e-commerce: a study of consumer perceptions, Electronic Commerce Research & Applications, 2(3), 203-215.

Coulter, K. S., & Coulter, R. A. (2003). Loyalty and firm performance, International Journal of Research in Marketing, 20, 31-43.

Cramer, A. O., van Ravenzwaaij, D., Matzke, D., Steingroever, H., Wetzels, R., Grasman, R. P., ... & Wagenmakers, E. J. (2016). Hidden multiplicity in exploratory multiway ANOVA: Prevalence and remedies. Psychonomic Bulletin & Review, 23(2), 640-647.

Cronin, J. J., & Taylor, S. A. (1992). Measuring service quality: a reexamination and Extension, Journal of Marketing, 55-68. http://dx.doi.org/10.2307/1252296.

Cronin, J. J., Brady, M. K., & Hult, G. T. M. (2000). Assessing the effects of quality, value and customer satisfaction on consumer behavioral intentions in service environments, Journal of Retailing, 76(2), 193-218.

Ebaid, E. I. (2009). The impact of capital-structure choice on firm performance: empirical evidence from Egypt. The Journal of Risk Finance, 10(5), 477-487.

Kamau, L. W. (2017). Effect of Loyalty Programs on Customer Retention: A Case of Nakumatt Supermarkets Kenya (Doctoral dissertation, United States International University-Africa).

Kendal Peiguss (2012), “7 Customer Loyalty Programs That Actually Add Value”, http://blog.hubspot.com/blog/tabid/6307/bid/31990/7-Customer-Loyalty.

Kerlinger, F. N., & Lee, H. B. (2000). Foundations of behavioral research (4th ed.). New York: Harcourt College Publishers.

Lee, J. (2009). Does Size Matter in Firm Performance? Evidence from US Public Firms. International Journal of Economics Business, 16 (2), 189–203.

Lee, K. (2008). Korea’s FTA Policy in the Context of World Trade, Presented at the 31st Year Anniversary seminar by Korea Society for International Trade, Seoul.

Magatef, S. G., & Tomalieh, E. F. (2015). The impact of customer loyalty programs on customer retention. International Journal of Business and Social Science, 6(8), 78-93.

Nirosha H. W., & Stuart M. L., (2014) Ownership Structure and Firm Financial Performance: Evidence from Panel Data in Sri Lanka. Journal of Business Systems, Governance & Ethics, 7(1) 234-249.

Russell. L., & Julie, Z. S. (1986). Customer loyalty programs: are they fair to consumers, Journal of Consumer Marketing, 23(7), 458 – 464

Salmon, D. C., Dey, M. D., & Amaro, L. (2017). U.S. Patent Application No. 15/632,098.

Siyanbola, T. T., Olaoye, S. A., & Olurin, O. T. (2015). Impact of gearing on performance of companies. Nigerian Chapter of Arabian Journal of Business and Management Review, 62(1891), 1-13.
Published
2019-08-15
How to Cite
Kiarie, J., Kirori, D. G., & Wachira, P. D. (2019). Moderating Effect of Gearing Ratio on the Relationship between Loyalty Programs and Financial Performance of Selected Firms in Service Industry in Kenya. Journal of Economics, 3(1), 86 - 98. Retrieved from https://stratfordjournals.org/journals/index.php/journal-of-economics/article/view/319
Section
Articles