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


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


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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