An Examination of the moderating effect of financial resilience on the working capital management and profitability nexus

Abstract

This study will examine the moderating effect of financial resilience on the relationship between Working Capital Management (WCM) strategies and profitability among firms listed on the Nairobi Securities Exchange (NSE). The research seeks to understand how different WCM strategies- aggressive, conservative and matching interact with a firm's financial resilience to influence profitability. By emphasising resilience, the research seeks to shift public and managerial attitudes towards prioritising long-term financial health over short-term gains, ultimately fostering a more robust business environment. From an economic perspective, improved WCM practices can contribute to overall stability of the financial system by reducing the risk of firm insolvencies. Moreover, the study is likely to influence public attitudes towards the importance of building financial resilience, encouraging businesses to adopt robust risk management strategies to better navigate economic shocks and downturns. This study contributes to the existing body of knowledge by integrating financial resilience into the WCM-profitability framework, offering practical implications for policy makers, financial managers and investors. It provides evidence that strengthening financial resilience is vital for optimising the outcomes of WCM strategies, particularly in emerging markets like Kenya. Additionally, the study highlights potential avenues for further research including industry - specific analyses and the exploration of non- financial indicators of resilience.