Investment Decision, Capital Structure, Risk Management and Financial Performance of SMEs in Ituri Province, DRC

  • Ariaka Sabho Timothee
  • Isaiah Onsarigo Miencha
Keywords: Investment decision, Capital structure, Risk management, Financial Performance of SMEs

Abstract

This paper investigated the relationship between investment decision, capital structure, risk management and financial performance of SMEs in Ituri province, DRC. Specifically, the study was guided by the following objectives: to examine the relationship between investment decision and financial performance, relationship between capital structure and financial performance, relationship between investment decision, risk management and financial performance, relationship between capital structure, risk management and financial performance of SMEs in Ituri province, DRC. The study adopted a descriptive cross sectional design. Quantitative approach was employed. The researcher used purposive sampling and simple random sampling techniques to select the respondents. The study population was 3386 SMEs owners and managers with 246 as a sample size. The sample size was calculated using Krejcie and Morgan table (1970) for determining sample size. The findings revealed a weak but significant positive relationship between investment decision and financial performance of SMEs (r = 0.442, P-value = 0.000); between capital structure and financial performance of SMEs (r = 0.321, P-value = 0.000); between investment decision, risk management and financial performance of SMEs (r = 0.401, P-value = 0.000), and a weak but significant positive relationship between capital structure, risk management and financial performance of SMEs (r = 0.419, P-value = 0.000). The study findings further revealed a very weak predictive variables power 27.8% of the variance in financial performance (R-square = 0.278) with investment decision as the most influential predictor (β = 1.237, Sig 0.000) followed by risk management (β = 1.167, Sig 0.40) and lastly the capital structure (β = -.014, Sig 0.971) in the model. Given the weak findings obtained from this study, beyond the independent variables studied, there is a need to investigate other factors determining financial performance in this part of the world. The paper recommends that owners and managers of SMEs in Ituri, DRC should enhance their investment decision, capital structure and risk management, through selecting a profitable investment sector, using mixture of equity and debt finance, diversifying their business portfolio, integrating the market research in the investment process, adopting business planning process practices in their investment planning in order to reduce the effects of potential risks, building capacity of staff and employees on risk management for better financial performance, because these are all very important aspects in determining financial performance.
Published
2022-10-14
Section
Articles