The Effects of working capital management efficiency in listed companies on the Nairobi Securities Exchange
Date
2019
Authors
Maina, Dominic Gachira
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Efficient working capital management is a pre-requisite for enhancement of shareholders’ value and has a direct correlation with the firm’s profitability and as a consequence, the shareholders’ wealth maximization objective. The purpose of this study was to assess the economic consequences of working capital management efficiency in listed companies on the Nairobi Securities Exchange. The specific objectives were; to establish the influence of working capital management efficiency on a firm's future financial performance, to examine the contribution of working capital management efficiency of market performance and to analyze the managerial perspectives on the economic consequences of working capital management.
Data was collected using both primary data source (questionnaires) and secondary data sources (annual reports). The data was analyzed using descriptive statistics and OLS regression analysis. The findings showed that inventory conversion period and account payable were significant in explaining changes in profitability. However, the cash conversion cycle and account receivables days were insignificant in explaining changes in profitability. The findings showed that account receivable days, inventory conversion period, account payable and cash conversion cycle were all significant in explaining the firm’s cash flow. The findings also showed account receivable days, inventory conversion period, and cash conversion cycle were all significant in explaining the firm market value. However, account payable days was insignificant in explaining firm’s market value. In the stock liquidity model, the findings showed account receivable days, inventory conversion period, and cash conversion cycle were significant in explaining the stock liquidity. However, account payable days was insignificant in explaining firm’s stock liquidity. The study, however, had several limitations. Annual reports for some the companies were not readily available. Managers from some companies were reluctant to fill up the questionnaires.
Description
A thesis submitted in partial fulfillment of the requirement for the Degree of Master of Commerce at Strathmore University
Keywords
Working capital management efficiency, Listed companies, Nairobi Securities Exchange (NSE)