International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

Effect of Retained Earning Finance on Profitability of Kenyan Petroleum Firms
Dr. Motanya Omai Daniel, PhD

The petroleum sector in Kenyan is highly regulated by the government such that, the government sets all prices for most energy products. It is expected that the increased number of petroleum marketing companies over time is as a result of good returns in the sector but there opposite going by happenings in the market. The study’s main objective was to assess the effect retained earnings as a source of finance on profitability of petroleum companies in Kenya. A positivist philosophy was adopted to enable testing of the study hypothesis. The study adopted cross-sectional survey design with criterion sampling being used to arrive at 35 firms’ between 2007-2016. Primary data was collected by use of questionnaires along with secondary data. Descriptive statistics and Univariate tests (t-test and Pearson correlation) were carried out. The results indicated an inverse and insignificant relationship between retained earnings finance and profitability at 1% significance level. This is evidenced by the beta coefficient of -0.018 and a corresponding p-value of 0.975 under equations 1. The results signify that during the period of study, increasing use of retained earnings finance did not increase or reduce the profitability of petroleum firms in Kenya; implying an improvement in their financial status.

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