International Journal of Accounting, Finance and Risk Management

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The Effect of Transaction Cost on the Performance of SMEs in Kenya

Received: 26 January 2022    Accepted: 11 February 2022    Published: 9 March 2022
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Abstract

The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R2=0.228), f(6, 205)=2.181, p< .05, ROA explained 18.0%, (R2=0.180), f(6, 204)=2.904, p< .05, while sales growth explained 14.7% (R2=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.

DOI 10.11648/j.ijafrm.20220701.12
Published in International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 1, March 2022)
Page(s) 11-19
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Transaction Cost, Information Technology, Asymmetry of Information

References
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  • APA Style

    Abdikadir Noor Fidow, Selefano Odoyo, Francis Wambalaba. (2022). The Effect of Transaction Cost on the Performance of SMEs in Kenya. International Journal of Accounting, Finance and Risk Management, 7(1), 11-19. https://doi.org/10.11648/j.ijafrm.20220701.12

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    ACS Style

    Abdikadir Noor Fidow; Selefano Odoyo; Francis Wambalaba. The Effect of Transaction Cost on the Performance of SMEs in Kenya. Int. J. Account. Finance Risk Manag. 2022, 7(1), 11-19. doi: 10.11648/j.ijafrm.20220701.12

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    AMA Style

    Abdikadir Noor Fidow, Selefano Odoyo, Francis Wambalaba. The Effect of Transaction Cost on the Performance of SMEs in Kenya. Int J Account Finance Risk Manag. 2022;7(1):11-19. doi: 10.11648/j.ijafrm.20220701.12

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  • @article{10.11648/j.ijafrm.20220701.12,
      author = {Abdikadir Noor Fidow and Selefano Odoyo and Francis Wambalaba},
      title = {The Effect of Transaction Cost on the Performance of SMEs in Kenya},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {7},
      number = {1},
      pages = {11-19},
      doi = {10.11648/j.ijafrm.20220701.12},
      url = {https://doi.org/10.11648/j.ijafrm.20220701.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220701.12},
      abstract = {The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R2=0.228), f(6, 205)=2.181, p2=0.180), f(6, 204)=2.904, p2=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.},
     year = {2022}
    }
    

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  • TY  - JOUR
    T1  - The Effect of Transaction Cost on the Performance of SMEs in Kenya
    AU  - Abdikadir Noor Fidow
    AU  - Selefano Odoyo
    AU  - Francis Wambalaba
    Y1  - 2022/03/09
    PY  - 2022
    N1  - https://doi.org/10.11648/j.ijafrm.20220701.12
    DO  - 10.11648/j.ijafrm.20220701.12
    T2  - International Journal of Accounting, Finance and Risk Management
    JF  - International Journal of Accounting, Finance and Risk Management
    JO  - International Journal of Accounting, Finance and Risk Management
    SP  - 11
    EP  - 19
    PB  - Science Publishing Group
    SN  - 2578-9376
    UR  - https://doi.org/10.11648/j.ijafrm.20220701.12
    AB  - The astronomical transaction costs due to incomplete information and lack of economies of scale for SMEs contributed the failure of large portion of SMEs in Kenya. Unlike large corporations, transaction cost is a big component of SME expenses due to asymmetry of information and borrowing small amounts of fund at a time. Although virtual lending institutions reduced transaction cost by directly connecting the lender and the borrower, the interest rate charged by these institutions is higher than the mean profit rate for SMEs. The study used regression analysis, ANOVA, and correlation coefficient and the result indicated that transaction cost explained 22.8% of variations in market value (R2=0.228), f(6, 205)=2.181, p2=0.180), f(6, 204)=2.904, p2=0.147), f(6, 206)=1.471, p=> .05. It was found that transaction cost was significant in predicting market value and ROA, and null hypotheses were rejected. The correlation result showed that transaction cost was negatively and significantly correlated with SME performance r(210)=-0.363, p<0.05.
    VL  - 7
    IS  - 1
    ER  - 

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Author Information
  • School of Business, United States International University-Africa (USIU), Nairobi, Kenya

  • School of Business, United States International University-Africa (USIU), Nairobi, Kenya

  • School of Business, United States International University-Africa (USIU), Nairobi, Kenya

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