An assessment of the impact of debt financing flows on the performance of manufacturing firms in Zimbabwe: The case of beverage manufacturing firms in Harare

Abstract

This study assessed the impact of debt financing flows on the performance of beverage manufacturing firms in Zimbabwe. The study focused on assessing the impact of short-term debt financing on financial performance, establishing the impact of long-term debt financing on financial performance, assessing the impact of interest rates on financial performance and examining the impact of corporation tax rate on financial performance. The pragmatist philosophy was assumed, with the use of a descriptive research design. The target population comprised of 39 managers from 13 beverage manufacturing firms in Harare, Zimbabwe. The sample comprised of 36 managers and the sample size table was used to determine the sample size. Purposive sampling was used to draw the sample for the population. Thirty-six questionnaires were administered on both drop-and-pick basis and on-spot basis. The response rate was 83.33%. The questionnaire had 31 questions, distributed over 5 sections. Descriptive analysis was done through calculating and interpreting mean values and standard deviations. A review of some empirical studies revealed the absence of a unified theory to explain the impact of debt financing on financial performance. Multivariate regression and correlation analysis was done. The study findings were that short-term debt financing has a negative impact on firm performance and long-term debt financing has a positive impact on firm performance. The study also found that interest rates have a negative impact on firm performance and that the corporate tax rate has a positive impact on financial performance. It was recommended that management should take cognisance of the debt inflows that are suitable to the operating environment to help firms afloat.