Abstract: The study investigated the effect of financial decisions on financial stability of Kenyan Deposit-Taking Sacco Societies. Specifically, it analyzed how financial leverage, dividend policy, and liquidity as key indicators of financial decision-making, affect capital adequacy, which serves as a benchmark for assessing the financial stability of these institutions. The anchoring theoretical postulations included the theory of trade-off, dividend relevance theory, working capital management theory, and risk absorption theory. To achieve the research objectives explanatory research design was utilized. The study focused on DTS that have been operational from 2018 to 2022. Data of secondary nature was sourced via the audited annual statements of these DTSs finance, which were submitted to the Sacco Regulatory Authority. The findings revealed that financial leverage negatively and insignificantly affects financial stability, while dividend policy and liquidity both have a substantial positive effect on financial stability. Furthermore, the DTS’s size was noted to have significantly moderated the connection concerning financial decisions and financial stability. The study recommends strengthening existing regulatory frameworks to ensure DTS has robust liquidity risk management practices in place. This can include guidelines on liquidity stress testing, contingency funding plans, and liquidity ratio requirements. Clear and comprehensive regulations will help DTSs maintain adequate liquidity levels and mitigate liquidity-related risks.
Keywords: Financial Leverage, Dividend Policy, Liquidity and Financial Stability.
Title: Financial Decisions and Stability of Deposit Taking Savings and Credit Cooperative Societies in Kenya
Author: Mwacharo Diana Nadzua, Rosemary James, Fredrick Warui
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Vol. 12, Issue 2, October 2024 - March 2025
Page No: 182-194
Research Publish Journals
Website: www.researchpublish.com
Published Date: 13-January-2025
