INFLUENCE OF RETAINED EARNINGS ON THE PERFORMANCE OF PENSION FUNDS IN KENYA

Amos Tayari

Jomo Kenyatta University of Agriculture and Technology (JKUAT)

Prof. Willy Muturi (PhD)

Jomo Kenyatta University of Agriculture and Technology (JKUAT)

Dr. Karanja Ngugi (PhD)

Kenyatta University, Kenya

CITATION: Tayari, A., Muturi, W. & Ngugi, K. (2018). Influence of Retained Earnings On the Performance of Pension Funds in Kenya. International Journal of Economics and Finance. Vol. 7 (5) pp 29 – 45.

ABSTRACT

Reports from Republic of Kenya show that pension schemes in Kenya are associated with loss of billions of money every year, which reveals a decline in performance of the firms. The decline in returns of pension funds leads to delay or non-payment to retirees thus hindering realization of achievement of Kenya Vision 2030 and millennium development goals. The purpose of the study was to assess the influence of pension schemes retained earnings on the financial performance of pension funds in Kenya. The study employed casual research design using quantitative secondary data. The target population was 1308 pension schemes registered with the RBA. The study selected a sample of 79 pension funds using Fisher, Laing & Stoeckel formula. The secondary data was quantitative in nature and was collected from the annual financial statements of the pension funds filed with RBA. Statistic tests were done for all variables in order to aid subsequent analysis using Eviews computer package. Correlation analysis was used to test the relationship between the independent variables and dependent variable. Multiple regression analysis was used to test whether the study variables influence performance of pension funds. The study findings revealed that retained earnings and performance (ROA) are positively and significantly related (r=0.06835, p=0.000); and adherence to regulation and performance (ROA) are positively and significantly related (r=4.29196, p=0.000). Based on the study findings, the study concluded that retained earnings have a positive and significant relationship with the performance of pension schemes in Kenya. Further, the study concluded that adherence to regulations has a significant moderating effect on the relationship between financing structure and performance of pension schemes in Kenya. Based on the findings, the study recommended that pension schemes in Kenya should adopt efficient systems to strengthen retained earnings. Further, the study recommended the need for pension schemes to adhere to the set regulations.

Key Words: Retained Earnings, Pension Schemes, Adherence to Regulations and Financial Performance.

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