“The Determinants of Financial Performance of SACCOS: The Case of Toke Kutaye Woreda, West Shoa Zone, Oromia Regional State , Ethiopia”

Abstract

Financial performance is a measure of how well a company can generate revenue by utilizing assets from its primary mode of operation. But, there was no investigation in the study area. The purpose of this study was to assess the determinants of Financial Performance of SACCOS: the case of Toke Kutaye Woreda, West Shoa Zone, Oromia Regional State, Ethiopia. The secondary data sources were analysed by descriptive statistics, correlation analysis and, the result of regression analysis. Accordingly Return on asset, operational efficiency, debt equity ratio, donation, and deposit mobilization are statistically significant predictor variables in determining the financial self-sufficiency of SACCOs (ROA) Multi collinearity is a statistical concept where several independent variables in a model are correlated. Collinearity refers to two or more independent variables acting in concert to explain the variation in a dependent variable. the Asset Quality, Asset turnover ratio and ,turnover ratio have a positively and statistically significant effect on the financial performance (ROE). Therefore, the findings of the Debt-to-Capital Ratio have a negative and statistically significant effect on the financial performance (ROE) at p< .001with a B value of -35.22.However, the result of the Capital-to-Asset Ratio concerning Total Capital/Assets is a positively and statistically significant effect on the financial performance at p< .001with a B value of 439.285.Subsequently, the financial leverage and Debt to total assets have a positive and statistically significant effect on the financial performance (ROE) at p< .001with a B value of 1.049 and .008 respectively. However, the Debt - Equity Ratio has a negative and statistically significant effect on the financial performance at p< .001with a B value of -.007. Before investigating profounder into panel data econometric measurement, the first issue is to test the assumption of the classical linear regression model (CLRM). These were required to demonstrate the estimation technique. In this study, the following CLRM assumptions must be tested: errors term equal zero, multicollinearity test, heteroskedasticity test and normality. the determinants of the financial performance of SACCOs are implications that the cooperatives need to focus on these factors for either improvement or profitability. Hence, the cooperatives have to increase their members’ awareness by either training or any other way