EMPIRICAL INVESTIGATION ON INFLUENCE OF SPENDING BEHAVIOR ON INVESTMENT DECISIONS AMONG SME NAIROBI COUNTY

Abstract

Investment decisions play a significant role on the economic development of SMEs. This is because profitable investment projects result to financial prosperity of an enterprise. Despite adequate support by the Kenyan government through introduction of single business permits as a solution to business licensing, provision of grant funding and offering business training, SMEs continue to face serious challenges in making rational investment decisions which result to great financial losses. The study therefore sought to investigate influence of spending behavior on investment decisions among small and medium enterprises in Nairobi City County Kenya. The specific objective of the study was to determine the influence of spending behavior on investment decisions. The study was anchored on the human capital theory and explanatory research design was adopted. The study targeted 1,842 registered SMEs operating within Nairobi City County. A sample size of 329 respondents was selected using the simple random sampling technique. Questionnaires were used to collect primary data. The data collected was analyzed using both descriptive and inferential statistics. The finding indicated that spending behavior had a positive statistical significant influence on investment decisions. The study concluded that spending behavior played a key role on investment behavior. The study recommends that the Kenyan government should collaborates with well-established financial bodies such as World Bank in a bid to offer business training to SMEs. SMEs owners are consequently encouraged to continue taking up financial education courses and to always seek for financial expertise even before making investment decisions. The study also recommends that the Kenya Education curriculum should incorporate financial literacy courses so that students gain financial skills and knowledge at an early age. This will make them operate their firms successfully.