Does the Legal Framework Moderate the Relationship between Resource Allocation Reforms and Financial Performance of County Governments? Evidence from Kenya

Abstract

This study examined the effect of resource allocation reforms on the performance of county governments and how the legal framework moderates this relationship. The study was grounded on resource allocation theory, informed by positivist research philosophy and utilized a correlational research design. The target population consisted of the 47 county governments in Kenya, which were clustered into seven regional blocs. Within each regional bloc, a county with the lowest budget absorption rate, as per the Controller of Budget's 2023 report, was selected. The top and middle-level management employees in the Department of Finance and Economic Planning were selected resulting in 229 target respondents upon which a sample size of 144 was determined using Krejcie and Morgan formulae. Data was analyzed using the SPSS Analysis of Moment Structure, employing factor analysis and structural equation modelling. Results of the study revealed that resource allocation reforms had a statistically significant effect on County financial performance, (β=0.499, t=5.578, p< 0.05). However, the legal framework in place had an insignificant moderating effect on the relationship between resource allocation reforms and County financial performance (β=0.019, t=0.225, p> 0.05). The paper concludes that issues relating to reforms targeting resource allocation are important in improving the financial performance of county governments and recommends effective implementation of resource allocation reforms to ensure enhanced performance of county governments in Kenya.