The study sought to establish the relationship between debt knowledge and indebtedness in Kenya. Positivism paradigm was used in this study. The study adopted a cross sectional and correlational descriptive research design. The study targeted about 2.4 million employees in the formal sector. Three stage sampling was done, first, cluster sampling and then, stratified sampling and finally random sampling. The study used primary data collected by use of self-administered questionnaires. A pilot test of the questionnaire was conducted on 40 respondents to check its validity and reliability. 1000 questionnaires were circulated. Of the returned, 581 questionnaires were considered usable. Cronbach's alpha for likert type items was found reliable (over 0.7). Data analysis used IBM SPSS statistics 21 for descriptive and correlation analysis. Further, OLS Multiple regression models were used to examine the relationships between the independent variable and the dependent variable. The findings reveal that debt experience has a significant effect on indebtedness. Results also found that aggregated debt literacy only explain a mere 9.8 % of respondent's indebtedness. The study will help to buttress economic theories of borrowing. Further the government, policy makers, employers and scholars will benefit from the findings of the study. Future research should explore the effect of dimensions like debt attitude and financial socialization on indebtedness. Further, debt literacy for individuals in the informal sector need to be related to their indebtedness while the lenders' perspective need to be sought.
CITATION STYLE
Kariuki, M. I., Ogilo, F., & Mwangi, C. I. (2016). Effect of Debt Knowledge on the Indebtedness of Employees in the Formal Sector in Kenya. Universal Journal of Accounting and Finance, 4(4), 121–129. https://doi.org/10.13189/ujaf.2016.040402
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