International Journal of Economics, Commerce and Management

United Kingdom ISSN 2348 0386 Vol. VII, Issue 8, August 2019

http://ijecm.co.uk/

FINANCIAL MANAGEMENT PRACTICES

INFLUENCE ON FINANCIAL PERFORMANCE OF
FOOTBALL CLUBS IN KENYA: A CASE OF
FOOTBALL CLUBS AT KENYA PREMIER LEAGUE

Dickson Kamau Kinyariro

PhD Student, Kenya Methodist University, Meru, Kenya
kamaudickson@gmail.com

Rachael Gesami
Senior Lecturer, Kenya Methodist University, Meru, Kenya
rachel.gesami@kemu.ac.ke

Eunice Kirimi
Senior Lecturer, Kenya Methodist University, Meru, Kenya
eunice.kirimi@kemu.ac.ke

Abstract
This research was aimed at finding out whether a relationship exists between financial
management practices and the financial stability of football clubs in Kenya. The specific
objectives were to establish whether financing activities and investing activities influence
stability of football clubs in Kenya. The underpinning theories include: Agency theory in sports
and contracting theory. In this study, used explanatory research design was adopted. Data was
collected through the use of questionnaires. The target population comprised three respondents
from the twenty one football clubs that were participating between 2010-2014 versions of the
Kenyan Premier League. Data was collected from the three officials/administrators from each
respective club, namely: the Financial Officer, the Chairman and the club Accountant. The study
used purposive sampling to select the respondents, Yamane (1967) formula for calculating
sample sizes was used to calculate the sample size at 95% confidence level and e = 0.05. This

Licensed under Creative Common Page 199

 © Kinyariro, Gesami & Kirimi

resulted to 54 respondent’s Descriptive statistics and inferential statics were used to analyse
data. From the study it was established that financial management practices significantly
influence the financial stability of football clubs. The study concludes that with a well-articulated
financial management structure football clubs would improve their performance not only on the
football ground but also on the financial perspective of the clubs.

Keywords: SACCOs, Financial management practices, financial stability

INTRODUCTION
The key factor for economic success is a tight identification of fans with a particular sport club
and/or an athlete. In the first instance, high-quality sport products bring benefits directly from the
fans in a form of day-match revenues and souvenirs. Sponsorship, advertisement or
broadcasting rights fees are examples of other significant sources of revenues (Procházka,
2012).
Football clubs in Europe have started to integrate their trademarks into various services,
such as telephone services, credit cards with club advantages, using sponsorship agreements
while naming their sports team or their stadiums. There is a very intense competition among
football clubs in the European football arena. The meaning of success in sports and in finance is
two different concepts. When the top performers of the European football clubs were reviewed,
it is relatively easy to determine that success in the European football arena requires big
budgets. The analysis of football clubs‟ financial performance could provide some insights to
this matter. Generally football clubs have been established as associations due to tax benefits
and other legal advantages of the status. Associations are a form of non-profit organizational
structure and financial success is not generally an important goal for them. However, after the
game had turned into a billion dollar business the understanding of football club management
has changed. Finding funds to establish a strong football team with a top coach who is goal
oriented, winning championship cups on a national and international level has become a critical
issue.
Football in Africa on the other hand is used by governments, ethnic groups and political
parties to gain and maintain power. You may operate in a region where opposition to the
government is great. Football development in such regions is often neglected or hindered by
those in power. It would be wise to inform yourself of the „political reputation‟ of the region. -
Powerful people – businessmen, politicians, and so on – often interfere in football-related
matters for political reasons. For instance, they tend to impose their will on the team‟s line-up.

Licensed under Creative Common Page 200

 International Journal of Economics, Commerce and Management, United Kingdom

This happens on all levels. You will probably come into contact with individuals who want to use
the project for their own private purposes. Positions in football are highly prestigious. An FA
chairman prefers to call himself „president‟ and his presence alone commands the utmost
respect. Whoever deals with an FA or a club will learn that no decision can be taken without the
president himself. If you want to establish a working relationship with an organization in football,
it is vital to know who is in charge. You have to be very careful not to offend anybody.
Africa needs football infrastructures at a grassroots level. Large stadiums are useful a
few times a year, but well-maintained training facilities throughout the country are more
beneficial to the development of the game. One thing to remember is that poor infrastructures
increase levels of intimidation and violence. League centers in villages and small towns
commonly lack inner perimeters which make it easy for spectators to enter the field of play.
Violence against the referees, unfortunately, happens on a structural basis.

Financial Stability and Financial Management Practices

Ferri, (2017), in his study establishes that Sports performance can be defined as a club‟s ability
to obtain a high number of victories in the competitions in which it participates. Thus, a club has
high sports performance when it achieves high scores in these competitions. Indeed, the results
are influenced by a huge number of variables such as the players‟ personal and cultural values,
the club management‟s ability to define and reach sports goals through appropriate decisions,
individual player attributes, the coach‟s skills, the club‟s market size, the number of supporters,
and the casualty of the game. Clearly, the sports results are related to the existence of an
appropriate corporate structure that is able to regulate all of these.
Sports performance can significantly depend on a club income. As noted in prior studies,
the impact of monetary investments on business performance has been widely researched in
different disciplines and the majority of these studies have found that monetary investments
generally have positive impacts on short- and long-term performance of the businesses. First,
there are many differences between the results within a short period and those occurring over
medium and long terms. According to several authors, within a short period, a club‟s ability to
maintain a high level of financial performance depends on the revenue from the transfer fees for
the most important players

Problem statement
Specifically sports in Kenya suffer from limited financial sources majority of which includes
scanty sponsorship, minimal gate collection, league fees among many other sources. Studies
done by Mmbaaya, (2013), Obonyo, (2013) and Thiga, (2014) establishes that; Clubs are

Licensed under Creative Common Page 201

 © Kinyariro, Gesami & Kirimi

overreliance on sponsorship deals and most of the revenues generated are consumed on
maintenance of club assets and facilities, and are not able to utilize all the available avenues for
generating revenues.
Deloitte & Touche, (2009) while presenting the Football Money League 2009 report,
acknowledged many clubs that were analyzed, fall under the category of the elite clubs of the
world football, and are iconic brands in their own making. This has them to enjoying
considerable demand that in many cases exceeds supply in terms of ground capacity, often
playing to sold-out stadia. While Nkaari and Ocholla, (2010) finds out that football clubs further
down the football pyramid including top-flight football in Kenya, the consistency, contribution and
structure of revenue from stadium-going spectators may vary from that of the elite clubs
featured. This is because upcoming clubs tend to have a more local focus, and hence revenue
base, and an excess of supply over demand for match day tickets (Nkaari and Ocholla, 2010).
The main issue that arises therefore is the ability of football clubs to raise revenue,
manage costs, invest and apply efficient financial practices to keep them financially sound in the
long term. However, according to Wilson (2011), sport has lagged behind other business
sectors from a financial point of view. In the closure of every football season the football clubs
can only be viewed liabilities from their respective sponsors.
Significant gaps have been established on matters of financial management practice‟s
influence on the financial stability of football clubs from this study. Lack of proper financial
management practices structures has over time deprived football clubs the privilege to
maximize their potential towards contributing fully to the economic development of the country.
This gap that arise from the highest level of football management have seen Public
power wrangles, widespread mismanagement, political intrigue and ethnic biasness of football
that robs Kenya‟s youth of valuable sorely needed opportunities and hampers socio-economic
growth. Ensuring good governance in the management of football would be a critical element in
addressing the youth issues

Objectives of the Study

General Objective
The general objective of this study was to establish the relationship between financial
management practices and the financial stability of football clubs in Kenya.

Specific objectives
i. To determine whether the working capital management influences the financial stability of
football clubs in Kenya

Licensed under Creative Common Page 202

 International Journal of Economics, Commerce and Management, United Kingdom

ii. To determine whether financing activities influences financial stability of football clubs in
Kenya

Research hypotheses
i. Ha: There is a significant relationship between working capital management and
financial stability of football clubs in Kenya
H0: There is no significant relationship between working capital management and
financial stability of football clubs in Kenya
ii. Ha: There is a significant relationship between financing activities and financial stability
of football clubs in Kenya
H0: There is no significant relationship between financing activities and financial stability
of football clubs in Kenya

Justification of the Study

The Government, and specifically the Ministry for Youth and Sports, stands to benefit from a
financially viable domestic Premier League that attracts the best players from not only the
region but the world. A globally recognized brand will attract visits from clubs and countries that
are icons of the sport. The study will provide new knowledge in the field of sports from a
business perspective, and specifically football. The results and recommendations of this
research paper might be used as a guide to further research on the subject.

Scope of the Study

The study was restricted to football clubs in Kenya. Information was gathered from existing
football clubs who have participated in the Kenyan Premier League (KPL) between years 2010 -
2014. The population scope was the respondents based all over the country. The unit of
analysis was the football club in Kenya. Financial officers, accountants and chairmen of these
football clubs were the respondents of this study.

LITERATURE REVIEW
Theoretical Review
There are concept and assumptions that explains the origin and the previous solutions
available. These concepts and assumptions are explained in form of theories, hence the
presence of this (theoretical review). These theories include pecking order theory and game
theory in sport as explained below.

Licensed under Creative Common Page 203

 © Kinyariro, Gesami & Kirimi

Agency Theory (1973)

Football clubs are owned by different types of owners. There are those owned by the
community, government, private owners such as individuals and companies. The owners of this
clubs do not directly run them, they seek assistant from various employees at different capacity.
The presences of employees to work on behalf of the owners creates a problem known as the
agency problem. The research borrows the understanding of the agency theories to link the
agency problems towards financial stability of football clubs.
The agency theory plays an important in the management of firms‟ finances as it
depends on the ability and ethics of the managers responsible for running the organization.
Football clubs are owned by different entities, they are either community based or corporate
clubs. The management of these football clubs are entrusted to elected leaders to work on
behalf of the owners. Given this, the alignment of interests between owners and managers may
be compromised. In fact, a central principle of agency theory is that high-ranking corporate
officers, acting as the agents of shareholders, can pursue courses of action inconsistent with the
interests of owners (Dalton & Certo, 2003).
It‟s important for any organization to safe guard both the interest of the owners as well
as its employees. The research finds out that with a well-articulated agency relationship I.e.
proper remunerations qualified staff the financial standard of the football will be uplifted creating
a financially stable club with minimal agency problems. The study has aligned its findings with
the help of the facts laid down by the agency theory.

Contracting theory
There are various motivation strategies to employees. Some are motivated by monetary aspects
while are others look toward other benefits which are not monetary in nature. In Football the
players are young most of them their first career to get earnings. Due to this fact the football
players are largely motivated by their level of earning, job security and desire to grow and play
for bigger clubs with extra wages. The terms of contract offered to this football players largely
plays a greater role in their motivation aspect hence influencing their overall on field
performance and leading to the success of their clubs. Due to the above this research has been
greatly influenced by the postulates of the contracting theory.
Contracting theory has been established by David Gauthier In his 1986 book, Morals by
Agreement, set out to renew Hobbesian moral and political philosophy. Hobbes argued that
men‟s passions were so strong as to make cooperation between them always in danger of
breaking down, and thus that a Sovereign was necessary to force compliance. Gauthier,

Licensed under Creative Common Page 204

 International Journal of Economics, Commerce and Management, United Kingdom

however, believes that rationality alone convinces persons not only to agree to cooperate, but to
stick to their agreements as well.
Within the realm of football, contract theory has to do with understanding how the
balance between competency and rewards is achieved. Essentially, contract theory involves the
need for communication between an agent and a principal, so that there is a clear
understanding of both the needs of the principal and the ability of the agent to meet those needs
in a competent manner. Once this state is established, contract theory is then employed to
ensure that the agent receives adequate rewards for his or her efforts. Players are obliged to
ensure results and social welfare of football clubs while the management of this football clubs
should ensure adequate compensation of players to achieve the intended goal of this clubs.
A contradiction always arises on whether football clubs should tie football players to long
term contracts or not. On one hand the long term contracts provide a sense of security and a
sense belonging, this may act as a source of motivation to perform better for club. On the other
hand this may make the player lazy due to the fact that his future is secured in the long run.
Short term contracts maybe used so as to motivate the players to work hard and perform better
to earn another contract with improved terms. For example Alexi Sanchez one of the highest
paid player in the English primier league, has reduced his work rate and performance upon
receiving the extra ordinary pay package as demonstrated by play player opta statistics.
One of the easiest ways to understand contract theory is to apply the principle to hiring
persons to labor in the workplace. Essentially, a prospective employee will provide information
about his or her ability to meet the requirements of a given position. In turn, the employer will
need to be in a position to verify the accuracy of the information provided. When the employer is
unable to do so, the condition is understood to be asymmetric. Asymmetric information is not
necessarily incorrect or false information. However, it does present a roadblock to the employer
being able to adequately evaluate the prospective employee (Wise Geek, 2013).

Empirical review
Empirical research on the financial management practices in football clubs worldwide has not
been widely done. This research have borrowed some of the empirical study on the influence of
financial management practice influence on financial performance from other related fields of
study. This has helped the researcher to relate this studies with this research on football clubs
financial stability. Comprehensive empirical review has been done and major findings have
helped in the study conclusions.

Licensed under Creative Common Page 205

 © Kinyariro, Gesami & Kirimi

Financing activities
Attractive football attracts a large pool of fans as per the findings of these research. The
presence of a large pool of fans attracts revenues in diverse ways. A large number of fans
attending live matches lead to increased revenues in terms of gate collection. This markets the
football club as a brand which in return leads to an increased sponsorship attraction. Also the
presence of a large number of fans creates an avenue for companies to market their product
hence leading to advertising equivalent value. This has also a ripple effect broadcasting media
which will lead match coverage increasing the revenue base for the club.
Financial activities vary in football clubs that is from: broadcast, commercial, and game
day finances. Financing includes sponsorships and merchandise, for example, Broadcast
financing indicates the financing stipulated by broadcast contract. Game day finances which
consists of tickets, Deloitte‟s Money League report 2014 (Deloitte, 2014).
Nagy, (2015) in his study on financing methods in professional football states that
naturally, football clubs use the same financing and credit rating criteria as other enterprises. In
addition to examining basic forms of financing (internal as well as external financing, own,
external and patron financing), important financing considerations such as risk, market value,
cost of capital or the opposition between owners and agents (asymmetry of information) must
also be taken into account. Risk is also a very important consideration for football clubs as well,
which is also due to the high degree of uncertainty of the sports results in the field of
professional football, which entails a much greater risk as compared to other economic areas.
This must be taken into account when selecting financing solutions. Assessing market value
and cost of capital for football clubs should be especially significant for management. These
considerations have not been accorded the significance they should have even by German
football clubs.
Irene, (2012) in her study on the effect of bank financing on the financial performance of
small and medium-sized enterprises in Nairobi county concludes that there was a steady rise in
the organizations bank financing over the five year period between year 2009 and year 2013.
Therefore, organizations bank financing in Nairobi County had a positive effect on the
performance of the organizations in Nairobi County since access to bank financing is an
important ingredient to the developmental and eventual growth and performance of
organizations. Given the steady increase in the organizations ‟ tangibility over the 5 year period
and the corresponding decrease in the organizations ‟ financial performance over the same
period, the study concludes that organizations ‟ tangibility negatively affected the financial
performance of the organizations in Nairobi County, Kenya. Given the steady decrease in the
organizations ‟ size over the 5 year period and the corresponding decrease in the organizations

Licensed under Creative Common Page 206

 International Journal of Economics, Commerce and Management, United Kingdom

‟ financial performance over the same period, the study concludes that there exists a positive
relationship between the organizations size and their financial performance.
Muriithi, (2014) in his study concludes that the use of personal income as a source of
financing for businesses does not influence the financial performance of mid-sized companies in
Kenya. Bank loans had a weak positive effect on the performance of firms hence concludes that
the use of bank loans as a source of financing for businesses does not influence the financial
performance of mid-sized companies in Kenya. The results show that venture capital had a
weak negative effect on the performance of firms. This effect was however not significant and
therefore the study concludes that venture capital does not influence the financial performance
of mid-sized companies in Kenya.

Working Capital Management

Hamza, Mutala, and Stephen, (2015), in their studies cash management practices and financial
performance of small and medium enterprises, conclude that organizations are not good at
managing their cash since they seem not to have embraced and implemented efficient cash
management practices in their business operations. This was envisaged in their low means of
the efficiency levels in cash their limited application of theories of cash management in their
operations .The study revealed that owners/managers experience is more important than
application of theories of both inventory and cash balances in majority of the Organizations in
the study. Football clubs rely so much on their employees to manage cash. The findings of this
study collaborate to a greater extent with the study of previous researchers which indicates that,
careless working capital management practices can be a major cause of organization‟s failure
and cash flow management , inventory control and bad debts or poor receivable management
are the most internal problems.
Waema and Nasieku, (2016) in their study on effect of working capital management on
the financial performance of listed manufacturing firms in Kenya establishes that given the
steady increase in average payment period (APP) mean values over the 10 year period and the
corresponding increase in financial performance of the listed manufacturing firms in Kenya over
the same period, the study concludes that creditors management as a working capital
component positively impacts the financial performance of the listed manufacturing firms in
Kenya over the 10 year period. Efficient management of creditors by football clubs plays a key
role in ensuring their continuity as well as liquidity capacity. Borrow short term loans, hire
football training as well as playing venues but ensure, hire transport means for players but
ensure the creditor get their pay in time to avoid creditor‟s apathy.

Licensed under Creative Common Page 207

 © Kinyariro, Gesami & Kirimi

Waema and Nasieku, (2016) in their study also establishes that, given the steady decrease in
average collection period (ACP) mean values over the 10 year period and the corresponding
increase in financial performance of the listed manufacturing firms in Kenya over the same
period, the study concludes that debtors management as a working capital component
negatively impacted on the financial performance of the listed manufacturing firms in Kenya
over the 10 year period. Given the steady decrease in inventory conversion period (ICP) mean
values over the 10 year period and the corresponding increase in financial performance of the
listed manufacturing firms in Kenya over the same period, the study concludes that inventory
management as a working capital component negatively impacted on the financial performance
of the listed manufacturing firms in Kenya over the 10 year period. Given the decrease in cash
conversion cycle (CCC) mean values over the 10 year period and the corresponding increase in
financial performance of the listed manufacturing firms in Kenya over the same period, the study
concludes that cash management as a working capital component negatively impacted on the
financial performance of the listed manufacturing firms in Kenya over the 10 year period.
Chebet, (2015) in her study on the effect of working capital management practices on
the financial performance of manufacturing firms in Nairobi county concludes that Working
capital management is a very important component of financial performance because it directly
affects the liquidity and profitability of the company Management performance would be
improved by managing working capital efficiently. Through the use of Ordinary Least Square
(OLS) regression found that cash conversion cycle is positively associated to the Return on
Equity (ROE). The results show that managers can improve their performance by managing
working capital efficiently. Accounts payables period and inventory turnover period components
of cash conversion cycle have positive relationship with return on Equity. This study found that
the relationship between the Accounts Receivables and Return on Equity is negative. This
implied that an increase in Accounts Receivables results to a decrease in return on assets .This
is in agreement to Atrill (2006) who attributes low receivable collection potential among the
organizations to lack of proper debt collection procedures such as prompt invoicing and sending
out regular statements. This causes the increase risk of late payment and defaulting debtors.
Aquino, R. (2010) found that the relationship between Debt-Equity Ratio and Return on
Equity is negative. This implies that an increase in Debt-Equity Ratio results to a decrease in
firm performance and vice versa. The study therefore concludes that working capital
management is a very sensitive area in the field of financial management which involves the
decision of the amount and composition of current assets and the financing of these assets.
Current assets include all those assets that in the normal course of business return to the form
of cash within a short period of time, ordinary within a year and such temporary investment as

Licensed under Creative Common Page 208

 International Journal of Economics, Commerce and Management, United Kingdom

may be readily converted into cash when need arises. The findings indicate that manufacturing
firm‟s performance is increased by decreasing accounts receivables period and inventory
turnover period. Although finance managers fear managing accounts payable period might stem
from the fact that more controlling the accounts payables period would damage firm‟s
reputation, and consequently decrease performance. Firm‟s that are involved in manufacturing
invest more in working capital raising the investment too high in proportion to the total Equity
employed and so it is vital that these funds are used in efficient and effective way. A firm can be
very profitable but if this is not translated into cash from operations within the same operating
cycle, the firm may have to borrow to support its continued working capital needs
Aquino, R. (2010) the study found that the relationship between the Current ratio and
Return on Equity is positive. This implied that an increase in current ratio results to an increase
in return on Equity and vice versa. The study found that the relationship between return on
Equity and average payables Period is positive. This implied that an increase in accounts
payables period results an increase in firms performance.
Aquino, R. (2010) studied the capital structure of listed and unlisted Indian firms. Results
indicated that higher debt is associated with high growth rates and profitability in unlisted firms.
His study showed that high debt ratio is positively associated with the firm‟s growth rate and
profitability, although he observed the opposite among the listed firms, which he attributed to the
cautiousness of large listed firms on the effect of reliance on debt financing on their share
prices.
Christopher (2009) asserts that the longer the accounts payables period the more
advantageous for the firm as such fund can be put to other uses. However, longer accounts
holding period can erode a firm‟s credit worthiness.
Waweru and Ngugi, (2014) in their study on Influence of Financial Management
Practices on the Performance of Micro and Small Enterprises in Kenya concludes that there‟s a
statistical significant between working capital and firm performance; that There exists a highly
significant negative relationship between the time it takes for firms to collect cash from their
customers; that heavy investment in inventory ties up capital which in the end reduces firm‟
profitability; and that there is need for a tradeoff between receivables and holding inventory if
the firm is to attain the required profits.
Mulualem, (2011) shows that there is statistically significant negative relationship
between profitability and average collection period. This result suggests that firms can improve
their profitability by reducing the number of day‟s accounts receivable outstanding. Also this can
be interpreted as the less the time it takes for customers to pay their bills, the more cash is

Licensed under Creative Common Page 209

 © Kinyariro, Gesami & Kirimi

available to replenish inventory hence the higher the sales realized leading to high profitability of
the firm.
The negative relationship between average collection period and profitability suggests
that an increase in the number of day‟s accounts receivable by 1 day is associated with a
decline in profitability. Through this, managers improve profitability by reducing the credit
granted to their customers, this argument was brought up by Lazaridis and Tryfonidis, (2006) in
their study on Relationship between working capital management and profitability of listed
companies in the Athens stock exchange.
Dong, (2010) focuses on the variables that include profitability, conversion cycle and its
related elements and the relationship that exists between them. The research finds that the
relationships among these variables are strongly negative. This denote that decrease in the
profitability occur due to increase in cash conversion cycle. It is also finds that if the number of
days of account receivables and inventories are diminished then the profitability increases.
Working capital management rule states that firms should strive to lag their payments to
creditors as much as possible, taking care not to spoil their business relationship. Through this,
Mathuva, (2010) in the study “the influence of working capital management components on
corporate profitability: a survey on Kenyan listed firms” shows that average payment period has
a positive relationship with profitability. The positive relationship suggests that an increase in the
number of day‟s accounts payable by one day is associated with an increase in profitability.
Football clubs in the country should ensure proper utilization of working capital hence prevent
financial instability in clubs.
Darun (2011) sought to examine the working capital management practices at an
organizational perspective focusing on the determinants of the various practices employed in
managing working capital. The research was based on multiple case studies of five Malaysian
companies that were listed on the main board of Bursa Malaysia. Semi structured interviews
were used to collect data from key informants that represented the managers of the various
components of working capital.
Apuoyo (2010) embarked on a study to find the relationship between the policies that
companies used and their effect on profitability. The study was based on fifty-five companies
quoted at the Nairobi Stock Exchange (NSE) in Kenya as at 31st December, 2009. The
companies were classified based on the NSE sector categorization proportionate random
stratified sampling was used. Relevant data was collected from the sampled companies‟ audited
financial reports for the five years since 2005 to 2009. The data was analyzed to find out the
annual working capital policy for each firm that were then classified into aggressive,
conservative and moderate policies. The relationship between the working capital policies and

Licensed under Creative Common Page 210

 International Journal of Economics, Commerce and Management, United Kingdom

return on total assets (ROTA), which was the measure of profitability, were determined using
simple regression. .
The studies on working capital management establishes that the firm‟s profitability
increases with the firm‟s gross working capital efficiency, size and less aggressiveness in asset
management. Contrary to conventional theory that a conservative working capital policy
sacrifices profits at the expense of liquidity the study revealed a positive relationship between a
conservative working capital policy and firms profitability. Significant differences in working
capital policies between the five sector classifications was also realized. The researchers also
found out that the working capital management practices employed in various firms depend on
various determinants including perceived environmental uncertainty, budgetary control,
organizational structure, interdependency and information technology, and organizational
culture.
Based on the empirical review available on working capital management of organizations
in various fields and the finding from this research. We can establish that although the working
capital components of football clubs are unique in nature, if we integrated the working capital
management practices of other organization to football clubs, it would enhance the efficiency in
management of the working capital leading to the financial stability and growth of these football
clubs. It is therefore imperative to link the finding of the studies done in other areas with finding
of this research to optimize efficient working capital management especially in football clubs.

Working capital
management
Stability of football
clubs

Financing activities

Figure 1: conceptual framework

RESEARCH DESIGN
Methodology
In this study, explanatory research design was adopted. Data was collected through the use of
questionnaires. The target population comprised of the twenty one football clubs that were
participating between 2010-2014 versions of the Kenyan Premier League. Data was collected
from three officials/administrators from each respective club, namely: the Financial Officer, the
Chairman and the club Accountant comprising to total of 63 respondents. The above

Licensed under Creative Common Page 211

 © Kinyariro, Gesami & Kirimi

respondents are in a position to give credible information pertaining the financial management
practices in football clubs. The study used purposive sampling to select the respondents,
Yamane (1967) formula for calculating sample sizes was used to calculate the sample size at
95% confidence level and e = 0.05.

Where, n is the sample size, N is the population size, and e is the level of precision. This
resulted to 54 respondents. Data was collected by the use of structured questionnaire.
Saunders et al. (2009) define a questionnaire as the general term including all data collection
techniques in which each person is asked to answer the same set of questions in a
predetermined order. The questionnaire were structured using measurement variables such as
nominal, ordinal, interval and ratio scales which are the most widely used classification of
measurement Kothari, (2004). The questions were structured both as an open-ended and
closed-ended to make collection of relevant information and coding of the answers possible. To
give the respondents greater flexibility in their responses, a Likert Scale questionnaires were
used. According to Stangor, (2010), “a Likert scale consists of a series of items that indicate
agreement or disagreement with the issue that is to be measured, each with a set of responses
on which the respondents indicate their opinions.”Descriptive statistics and inferential statics
were used to analyse data. Multiple linear regression was also used to link the relationship
between independent variables (investment practices and working capital management) and
dependent variable (financial stability) and was guided by the following model:
FS= β0 + β1IP + β2FA + ɛ
Where, FS is the dependent variable (Financial stability),
β0 is the intercept
IP =Independent variable Investment Practices
FA =Independent variable Financing Activities.
Ei is the error term.

RESULTS
Working capital management
The study focuses on various variables that include financial stability, conversion cycle and its
related elements and the relationship that exists between them. Working capital management
rule states that firms should strive to lag their payments to creditors as much as possible, taking
care not to spoil their business relationship. Football clubs in the country faces myriad of

Licensed under Creative Common Page 212

 International Journal of Economics, Commerce and Management, United Kingdom

financial problems to a point that they are not able to pay creditors hence ruining the credit
worthiness. Proper utilization of working capital can enhance financial instability in clubs.

Descriptive statistics
There various types of debt that football clubs are owed by other organizations and individuals.
This debt range from the annual capitation from the Kenyan Premier League, sponsorship
money, player transfer fee among others. Efficient collection of debt ensures that the football
stays a float in terms of its financial status. Every organization including football clubs should
ensure an efficient debt collection policy. In football clubs in Kenya the debt collection policy is
poor as the researcher established. The respondents disagreed that the clubs meet the
stipulated debt collection period as shown in the table above.
There various types of debt owed by the football clubs. This debt range from the player‟s
wages, transports outsourced, and fields cost among others. Efficient payment of debt ensures
that the football stays a float in terms of its financial status, also it ensures that a good
relationship exists between the creditors and the football club. Every organization including
football clubs should ensure an efficient credit policy. In football clubs in Kenya the credit policy
is poor as the researcher established. The respondents disagreed that the clubs meet the
stipulated debt payment to creditors is enacted in time as shown in the table above. Lagging the
payments of debts can be healthy since the clubs can invest the money but ensuring a healthy
relationship with the creditors is maintained.
Various players who are contracted by the football clubs in Kenya have often refused to
train and play for their respective clubs due to accrued wages. This scenarios have put off most
of the potential investors and sponsors of the respective clubs. Satisfied player engage in
proper training hence translating it on to the field performance. This attracts a large pool of fans
to attend matches while ensuring an increased revenues in terms of gate collections. Some the
football clubs actually pay staff salaries and wages in time, while others delay. This is reflected
on the actual performance of each club on the pitch
The cash conversion cycle is a metric used to gauge the effectiveness of a
company's management and, consequently, the overall health of that company. The calculation
measures how fast a company can convert cash on hand into inventory and accounts payable,
through sales and accounts receivable, and then back into cash. Football clubs receive cash
from various sources. The cash is usually deposited at different times to the accounts. The cash
received is used to run the football clubs affairs. Sale of football merchandise, gate collections
and other revenues received can be converted to ensure that enough working capital is
available to meet the daily obligations of football clubs.

Licensed under Creative Common Page 213

 © Kinyariro, Gesami & Kirimi

Regression analysis

Table 1: coefficient for regression of WCM: FS

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .885a .784 .780 .377

a. Predictors: (Constant), working capital management

In reference to the above table, the independent variable that was studied, explain 78% of
working capital management relationship to financial stability of football clubs as illustrated by
the adjusted R2. Working capital management plays a significant role towards the financial
stability and success of football clubs as illustrated by the above results.

Table 2: ANOVA (WCM)

Model Sum of Squares Df Mean Square F Sig.

1 Regression 26.767 1 26.767 188.559 .000a

Residual 7.382 52 .142

Total 34.148 53

a. Predictors: (Constant), working capital management b. Dependent Variable: financial stability

Table above shows the significance value is 0.000 which is less than 0.05 thus the model is
statistically significance in predicting how working capital management influence financial
stability of football clubs in Kenya. The F critical at 5% level of significance was 2.32. Since F
calculated is greater than the F critical (value = 188.559), this shows that the overall model was
significant.

Table 3: regression relationship between WCM: FS

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) .566 .172 3.297 .002

working capital
.855 .062 .885 13.732 .000
management

a. Dependent Variable: financial stability

Licensed under Creative Common Page 214

 International Journal of Economics, Commerce and Management, United Kingdom

H1: There is a significant relationship between working capital management and the
financial stability of Football clubs
The researcher conducted a linear regression analysis so as to explain the influence working
capital management on financial stability of football clubs. The variable as per the SPSS
generated, the equation: FS= 0.147 FA - 0.980 hence the equation Yi=B0+B1X1+ έ. To assess the
significance of each independent variable on the dependent variable, the researcher established
that financial activities is significant and influenced the financial stability of football clubs as its P
values were less than 5%.
Various researcher have come up with different arguments on optimal working capital
requirements by firms. For example there is a research that shows that there is statistically
significant negative relationship between financial stability and average collection period of
pledges from sponsors. The results suggests that football clubs can improve their financial
stability by ensuring that all the pledges are received in due time. The negative relationship
between average collection period and profitability suggests that an increase in the number of
day‟s accounts receivable by 1 day is associated with a decline in profitability. Through this,
managers improve profitability by reducing the credit granted to their customers, this argument
was brought up by Lazaridis & Tryfonidis, (2006) in their study on Relationship between working
capital management and profitability of listed companies in the Athens stock exchange.
Another study focuses on the variables that include financial stability, conversion cycle
and its related elements and the relationship that exists between them. The research finds that
the relationships among these variables are strongly negative. This denote that decrease in the
financial stability of football clubs occur due to increase in cash conversion cycle. It is also finds
that if the number of days of account receivables are diminished then the profitability increases.
Working capital management rule states that firms should strive to lag their payments to
creditors as much as possible, taking care not to spoil their business relationship. Football clubs
in the country faces myriad of financial problems to a point that they are not able to pay
creditors hence ruining the credit worthiness. Proper utilization of working capital hence prevent
financial instability in clubs. Mathuva, (2010) in the study “the influence of working capital
management components on corporate profitability: a survey on Kenyan listed firms” shows that
average payment period has a positive relationship with profitability. The positive relationship
suggests that an increase in the number of day‟s accounts payable by 1 day is associated with
an increase in profitability. Football clubs in the country should ensure proper utilization of
working capital hence prevent financial instability in clubs.

Licensed under Creative Common Page 215

 © Kinyariro, Gesami & Kirimi

Financing activities
Football as a sport should ensure a high level of financial integration for the sport to survive. The
management of these football clubs should strive to ensure sufficient availability of finance to run
the sport. There are various avenues available to the management of this clubs where they can
source finance. But even with the available finances it‟s important for the football clubs to ensure
proper financial management practices to enhance the long-term capabilities of these clubs.
Financial activities in football vary from broadcast, commercial, and game day finances.
Commercial financing includes sponsorships and merchandise, for example. Broadcast indicates
the financing stipulated by broadcast contract and game day finances which consists of tickets,
also merchandise sale and merchandise distribution channels plays a key role in ensuring
availability of finances in the football clubs, Deloitte‟s Money League report 2014 Deloitte, (2014).

Descriptive statistics
The goal of any football clubs is to win as many matches as possible although League, success
can be bought. Examples of Manchester City and Queen Park Rangers have shown that it is
possible to turn mediocre clubs into winning clubs with the help of wealthy investors financing
operations and player acquisitions. The winning team is built at the expense of profitability,
enabled by the owners acting as benefactors to great extent. For them, the return on investment
is highly emotional with respect to the points and titles won. Attractive football ensures a wide
pool of fans. Good team performance on the field is very crucial in enhancing the financial
activities of a given football club. The aim of any organization is to generate financial resources.
In sport the primary source of revenues comes from the fans of the sport. In football it‟s
important that matters appertaining to the prices of tickets are cautiously taken into
consideration. The charges set on any match ticket should take into consideration many factors,
such the convenience of the location, and fan segmentation among other factors.
For a fan to attend a football match and for a football club to benefit from the attendance
of the fans, some financial charges have to be incurred by the fans, this charges are sold inform
of tickets. There are various tickets ranging from season tickets to match day tickets. The prices
set by the respective football clubs for a ticket influences the number of football fans to attend
the match hence an influence on the financial activities of the clubs. This can be seen from the
fact that the majority of the respondents were of the view that ticket pricing plays a key role on
the overall financial activities of football clubs. Various researchers have been able to establish
that proper ticket pricing enhances the revenue base required of the football clubs. However
from the findings the researchers establishes that the prices go beyond the amount of money
paid per ticket but thorough market review on the affordability of the tickets should be enhanced

Licensed under Creative Common Page 216

 International Journal of Economics, Commerce and Management, United Kingdom

to strike the balance between ticket price and the affordability. This will enable revenue
attraction and further lead to the financial stability of football clubs.
Football clubs in Kenya are located at various geographical parts of the country. Some
are located in Nairobi, Mombasa, Nakuru, Naivasha and Kakamega. Some of this clubs prefer
to play their matches in Nairobi where there are a wide pool of fans to attend the matches. The
convenience of the location/venue of the football clubs plays a key role in attraction of football
fans hence greater revenues. From the researchers convenience and location of a football
match has a major influence on the financial activities of football clubs in Kenya.
The fanatics would most of the time sacrifice their activities to attend any football match
for their respective clubs unless there is sort an apathy towards the club. This cannot be said of
the normal fan. Careful planning by the football management and the football federation as well
should be taken into consideration to convenience and as high as possible number of fans
attend the football matches.
Major football clubs in the world bring on board a number of sponsor, for example the
jersey sponsor, kit sponsor, stadium sponsors. In Kenya the case is not different to football
clubs. The Kenyan clubs depend on sponsorship deals to be able initiate most of the operations
within the clubs. Level of sponsorship has a significant influence on the overall financial
activities of this clubs. Sponsorship deals have been found to be very significant in promoting
the financial activities of football clubs hence enhancing the financial stability of football clubs.
A football club is a brand by itself. The player uniforms i.e. the training kits as well as the
playing are of high value to the fans of the respective football clubs. Sale of replica merchandise
should be efficiently managed to enable the clubs generate the maximum revenues. Prudent
financial management practices should be embraced to avoid misappropriation of this revenues
even before they reach the respective football clubs. This sale of merchandise if well managed
can be a gold mine in terms of financial resources to the clubs.
With a well-managed sales channels of replica merchandise of the various football clubs,
there is a wider range of revenue attraction. However in Kenya football clubs have not been
able to ensure a proper channel for sale of their merchandise. Middle men, brokers and cartels
benefit from the sale of this merchandise while football clubs suffer greatly due to the loss of this
revenue. As established by the researcher clubs lowly benefit from the sale of their merchandise
which is supposed boost their financial activities.
Most of the fans who attend football matches in Kenya are low income earners. Some of
them only wishes to wear the colors of the clubs they are supporting. However majority of this
prefer to purchase quality merchandise. The quality of merchandise has a major role to play in
contributing towards financial activities of the respective football club. A high quality product

Licensed under Creative Common Page 217

 © Kinyariro, Gesami & Kirimi

eliminates cartels due to the high costs involved in production. From the various researchers
point sale of merchandise contribute effectively towards the revenue base of football club,
however whether the quality of merchandise sold has an influence on the overall contribution
towards extra revenues has not been established. From this study the quality of merchandise or
replica materials sold by the football clubs influence the revenues as well as the financial
stability of football clubs.
With a well-managed sales channels of replica merchandise of the various football clubs,
there is a wider range of revenue attraction. However in Kenya football clubs have not been
able to ensure a proper channel for sale of their merchandise. Middle men, brokers and cartels
benefit from the sale of this merchandise while football clubs suffer greatly due to the loss of this
revenue. As established by the researcher clubs with well managed distribution channels stand
to benefit heavily from the sale of their merchandise which and boost their financial activities.

Regression analysis
The researcher used regression analysis to establish whether a significant relationship exists
between financing activities and the financial stability of the respective football clubs in Kenya.

Table 4: Coefficient for the regression of FA: FS

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .931a .867 .865 .295

a. Predictors: (Constant), financing activity influence

In reference to the above table, the independent variable that was studied, explain 86.5% of
financing activities relationship to financial stability of football clubs as illustrated by the adjusted
R2. Financing activities plays a significant role towards the financial stability and success of
football clubs as illustrated by the above results.

Table 5: ANOVA (FA)

Model Sum of Squares df Mean Square F Sig.

a
1 Regression 29.623 1 29.623 340.427 .000

Residual 4.525 52 .087

Total 34.148 53

a. Predictors: (Constant), extent of financing activity influence

b. Dependent Variable: financial stability

Licensed under Creative Common Page 218

 International Journal of Economics, Commerce and Management, United Kingdom

Table above shows the significance value is 0.000 which is less than 0.05 thus the model is
statistically significance in predicting how financing activities influence financial stability of
football clubs in Kenya. The F critical at 5% level of significance was 2.32. Since F calculated is
greater than the F critical (value = 340.427), this shows that the overall model was significant.

Table 6: Linear Relationship between FA: FS

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta T Sig.

1 (Constant) .147 .150 .976 .333

financing activity influence .980 .053 .931 18.451 .000

a. Dependent Variable: financial stability

H1: There is a significant relationship between Financing Activities and the financial
stability of Football clubs
The researcher conducted a linear regression analysis so as to explain the influence financing
activities on financial stability of football clubs. The variable as per the SPSS generated, the
equation: FS= 0.147 FA - 0.980 hence the equation Yi=B0+B1X1+ έ. To assess the significance of
each independent variable on the dependent variable, the researcher established that financial
activities is significant and influenced the financial stability of football clubs as its P values were
less than 5%.
This study is in agreement with a study done by Nagy, (2015) in his study on financing
methods in professional football which states that naturally, football clubs use the same
financing and credit rating criteria as other enterprises. In addition to examining basic forms of
financing (internal as well as external financing, own, external and patron financing), important
financing considerations such as risk, market value, cost of capital or the opposition between
owners and agents (asymmetry of information) must also be taken into account. Risk is also a
very important consideration for football clubs as well, which is also due to the high degree of
uncertainty of the sports results in the field of professional football, which entails a much greater
risk as compared to other economic areas. This must be taken into account when selecting
financing solutions. Assessing market value and cost of capital for football clubs should be
especially significant for management.
The study however disagrees with a study done by Irene, (2012). Irene in her study on
the effect of bank financing on the financial performance of small and medium-sized enterprises

Licensed under Creative Common Page 219

 © Kinyariro, Gesami & Kirimi

in Nairobi County concludes that there was a steady rise in the organizations bank financing
over the five year period between year 2009 and year 2013. Therefore, organizations bank
financing in Nairobi County had a positive effect on the performance of the organizations in
Nairobi County since access to bank financing is an important ingredient to the developmental
and eventual growth and performance of organizations. Given the steady increase in the
organizations‟ tangibility over the 5 year period and the corresponding decrease in the
organizations‟ financial performance over the same period, the study concludes that
organizations‟ tangibility negatively affected the financial performance of the organizations in
Nairobi County, Kenya. Football clubs are not able to maintain proper and up to date books of
record hence are not able to access loans from the banks, apart from a few who are not to offer
security to guarantee them loans.

CONCLUSION
Only a handful of football clubs around the world are able to meet rapidly changing economic
requirements. Modern business forms and financing solutions greatly contribute to outstanding
footballing results and achievements. It is important to select financing sources and risks that
correspond to given economic circumstances and involve suitable investors.
The overall value of football, as an industry, has grown. Team performance can be
measured in several ways. Clubs compete in a number of sporting competitions- the domestic
league, the Sport pesa Cup, and the continental League. Domestic league performance as an
indicator cab used, firstly because it is the competition within which teams play most of their
matches, and secondly because club performance over time is comparable on this basis.
Clubs can improve their league performance by hiring or otherwise acquiring better
players compared to other competing clubs. Since there is a well-functioning market for player
talent any improvement in player quality can only be achieved through higher wage spending.
One expectation that one might hold about clubs that floated on the market is that they would
exploit their commercial opportunities more effectively, e.g. through merchandising and
sponsorship. This would manifest itself in the ability to extract higher revenues from a given
level of performance.
The study identifies several factors that affect attendance and revenue collection. The
first is the fixture, the game to be played. High intensity, high demand matches invoke a lot of
interest and passion. Average and low intensity matches invoke relatively less interest and
passion. Going beyond the various sources of revenue available to football clubs is imperative.
It‟s important to understand the behavior, needs and motives that drive both the fanatics and the
fans to attend various football matches. There is no doubt that contemporary market economy

Licensed under Creative Common Page 220

 International Journal of Economics, Commerce and Management, United Kingdom

conditions prevail in the professional sport, including football Professionals as well. In special
circumstances the company must create with market economy solutions the resources of this
area. Of course the state's role raises in financing of the professional football too.
League, success can be bought. Examples of Manchester City and Queen Park
Rangers have shown that it is possible to turn mediocre clubs into winning clubs with the help of
wealthy investors financing operations and player acquisitions. The winning team is built at the
expense of profitability, enabled by the owners acting as benefactors to great extent. For them,
the return on investment is highly emotional with respect to the points and titles won.

RECOMMENDATIONS
Football clubs should ensure that there exists multinational football squads, live television
broadcasts for international fixtures, swaps between team management styles from different
football cultures, direct foreign investments in football clubs, increasing number of international
fixtures and the transformation.
Football clubs and stakeholders should realize that the economic environment is very
dynamic. For the clubs to succeed pro-active and innovative measure must be put in place.
Football academies that train young footballers should be established. This will ensure supply of
senior players to the football clubs hence reducing cost of player recruitment while also maintain
a higher level of competitiveness.
The study recommends that the government policy makers should reform Kenya‟s
football sector to make it easy for access bank financing more easily to spur their financial
performance. From the findings, the study established that there exists an inverse relationship
between the football clubs tangibility and their financial performance. Therefore the study
recommends that the football clubs should adopt a capital structure that would allow them to
expand their business activities.

REFERENCES
Appuhami, B. A. (2008). The impact of firms capital expenditure on working capital management: An empirical study.
Journal of International Management, 4(1).
C, H. (2010). Player and referee: conflicting interest and the 2010 FIFA world cup. The Institute for Security Studies.
Chebet, R. (2015). The effect of working capital management practices on the financial performance of manufacturing
firms in nairobi county. unpublished.
Chepnoen, K. E., & Kimani, E. M. (2017). Investment planning practices and financial performance of micro retail
enterprises in Bungoma Town, Kenya. International Academic Journal of Economics and Finance.
Deloitte, & Touche. (2009). Football money leaguer. Lost in Translation.
Demba, G. A. (2013). Effects of financial management practices on profitability of listed companies. Unpublished.

Licensed under Creative Common Page 221

 © Kinyariro, Gesami & Kirimi

Dong, H. (2010). The relationship between Working Capital Management and Profitability. International Research
Journal of Finance and Economic, 49.
Githinji, P. (2010). Money does battle on the field. Journal of Intellectual Capital.
Hamza, K., Mutala, Z., & Stephen, K. A. (2015). Cash Management Practices And Financial Performance Of Small
And Medium Enterprises (Organisations) In The Northern Region Of Ghana. Accra: International Journal of
Economics, Commerce and Management.
Irene, A. S. (2012). The effect of bank financing on the financial performance of small and medium-sized enterprises
in nairobi county. unpublished.
Kimani, A. (2007). In financial performance and ineffectiveness in credit administration. MBA thesis.
Mathuva, D. (2010). The influence of working capital management components on corporate profitability: A survey of
Kenyan Listed Firms. Research Journal of Business Management, 4(1).
Mmbaaya, L. K. (2013). Financial performance of football clubs in Kenyan Premier League. Unpubished.
Mulualem, M. (2011). The Impact of Working Capital Management on Firms profitability. unpublished Masters Thesis
.
Muriithi, S. N. (2014). The effect of financing sources on the financial. unpublished.
Nagy, D. Z. (2015). Financing Methods in Professional Football. Óbuda University.
Nkaari, & Ochola. (2016). Ticket Master KPL Attendance and Collection. Retrieved from www.thestar.co.ke
Obonyo, M. O. (2013). Financing sports in Kenya: A case of Kenya BasketBall Federation. Unpublished.
Procházka, D. (2012). financial conditions and transparency of the Czech professional football clubs. PRAGUE
ECONOMIC PAPERS. Profitability of small and medium enterprises in Veitnam, Meiho University.
Thiga, S. R. (2013). Financial Management Practices on affecting growth of football clubs in Kenya. Unplished.
Waema, P., & Nasieku, T. (2016). Effect of Working Capital Management on the Financial Performance of Listed
Manufacturing Firms in Kenya. Asian Journal of Business and Management.
Waweru, C., & Ngugi, K. (2014). Influence of Financial Management Practices on the Performance of Micro and
Small.

Licensed under Creative Common Page 222