Effects of board and firm characteristics on cash conversion cycle in Kenyan non-financial listed firms: moderated by inflation rate
Date
2025
Authors
Getuma, C.
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Publisher
Strathmore University
Abstract
In 2022, the liquidity ratio of eight (8) business stocks was below 10 percent, which is an increase compared to six (6) stocks in 2021. This indicates a further decline in liquidity. This study sought to assess the effect of board, firm characteristics and cash conversion cycle in Kenyan Listed Firms, moderated by inflation. Specifically, the study sought to examine the effect of firm characteristics on the cash conversion cycle of Listed Firms in Kenya. Also, the study assessed the effect of board characteristics on the cash conversion cycle of Listed Firms in Kenya. Additionally, it investigated the moderating role of inflation rate on the relationship between board characteristics and firm characteristics on the cash conversion cycle of Listed Firms in Kenya. The study was based on two theories: the Liquidity Preference Theory and Resource Dependency Theory. The current study used a correlational research design and the positivism philosophy. The 63 companies listed on the NSE were the study's target population. The study focused on 45 non-financial listed firms. Panel data was gathered from publicly available financial statements on the websites of 45 publicly traded companies for the years 2019 to 2023, as well as published audited financial statements. The data abstraction tool was used to acquire the panel data. Descriptive statistics, panel regression analysis, and spearman's simple correlation analysis were used to analyze the data. The study included ethical considerations. The results showed that independent directors had a positive and significant effect on the cash conversion cycle. Further results showed that board diversity in terms of proportion of male directors in the board had a negative and significant effect on the cash conversion cycle. In addition, results showed that board size had a positive and significant effect on the cash conversion cycle. Regression results showed that firm age had a negative and significant effect on the cash conversion cycle amongst the firms listed in the NSE. Furthermore, the data indicated that the cash conversion cycle was positively and marginally impacted by business size. In addition inflation moderated the relationship between board characteristics and cash conversion cycle of companies listed on the NSE. However, inflation did not moderate the relationship between firm age, firm size and cash conversion cycle of firms listed in NSE. Therefore, our study suggests that companies listed on the NSE keep their board member count at an ideal number. The management of the listed company should make sure that board members have a great deal of autonomy so they can participate freely in the appropriate decision-making process. Legislators ought to enact measures that promote diversity on the board among board members. This would guarantee the fusion of concepts that would maximize the performance of the SACCOs by integrating ideas from both genders. Businesses can add value by building up their inventory, but only to the point where doing so will optimize returns and reduce maintenance costs while accounting for the effects of inflation and the cash conversion cycle. By doing this, finance managers may monitor their different industries and maintain a short cash conversion cycle. The study also relied on secondary data from the financial statements of the NSE firms in Kenya. While these are a reliable source of data, it is quantitative in nature and therefore it was not possible to fully interrogate issues of the NSE firms as may have been the case if interviews were conducted.
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Getuma, C. (2025). Effects of board and firm characteristics on cash conversion cycle in Kenyan non-financial listed firms: Moderated by inflation rate [Strathmore University]. http://hdl.handle.net/11071/15833