Assessing the Effect of Financial Management Practices on Financial Performance and the Moderating Role of Farm and Farmers’ Socioeconomic Characteristics on Dairy Enterprises

Abstract

Financial management practices can positively affect the finance performance, but this relationship is also influenced by the farm and farmer characteristics, which moderates the effect size. Thus, this research investigates the effect financial management practices on financial performance and the moderating role of farm and farmers’ socioeconomic characteristics of dairy enterprises. Based on existing researches, four financial management practices were considered and financial performance we considered profitability, liquidity, and solvency. The variables considered for moderation are; respondents’ age, education, and enterprise age. A hierarchical multiple regression with primary data was used to test for the moderating effect. The results revealed that financial management practices and firm and farmer characteristics significantly interact better with financial performance among dairy farm enterprise. Thus, the effect of financial management practices on financial performance depends on the firm and farmers’ characteristics such as age and education of the farmers, as well as the number of years the dairy enterprise exist. Implying that if dairy enterprises manage their capital structures, working capital, budget, and financial records this will ultimately increase profitability, liquidity, and solvency while incorporating more farm and farmers’ characteristics.