Cashflow Management Activities and Financial Performance of Manufacturing Firms Listed at Nairobi Securities Exchange, Kenya.
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Date
2023
Authors
Odhowa, Feisal Matan
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The performance of listed manufacturing firms greatly influences the growth of the Kenyan
stock market and the country's overall economy. Although implementing cash flow
management activities meant to boost financial performance, manufacturing firms’ financial
performance have remained inconsistent. Therefore, it is still uncertain if cash flow
management operations have a significant effect on how well listed manufacturing firms
function. Given this context, the study set out to determine how cash flow management
activities affected the financial performance of manufacturing firms listed at Nairobi Securities
Exchange. The specific objectives of the study were; to examine the effect of cash flow
management from operating activities on the financial performance of manufacturing firms
listed at Nairobi Securities Exchange, Kenya, to evaluate the effect of cash flow management
from investing activities on the financial performance of manufacturing firms listed at Nairobi
Securities Exchange, Kenya and to establish the effect of cash flow management from
financing activities on the financial performance of manufacturing firms listed at Nairobi
Securities Exchange, Kenya. Research hypotheses were established at 0.05 significance level.
Three theories, including the Keynesian theory of money, the free cash flow theory and the
cash flow management theory, served as the premise for this study. The study utilized a causal
research design. The study utilized a census to determine the target demographic, which
consisted of eight manufacturing firms listed at the NSE. The study encompassed a span of five
years, from 2017 to 2021. Secondary data was gathered using an abstraction tool for data. The
panel regression model was used. Data analysis methods included panel regression analysis and
descriptive statistics (mean and standard deviation). Prior to the analysis, the diagnostic tests
(normality, multicollinearity, heteroscedasiticity, stationarity, autocorrelation and model
specification tests) were run. Tables, graphs, and frequency tables were utilized to display the
data. The study followed ethical guidelines as appropriate. According to the inferential
statistics, cash-flow management from operating activities has no statistically significant effect
on the financial performance of manufacturing enterprises. It was revealed that cash flow from
investing activities has statistically significant effect on the financial performance of
manufacturing enterprises. In regards to cash-flow management from financing activities, the
researcher found that it has statistically insignificant effect on the manufacturing firms’
financial performance. The study recommends that manufacturing firms should adhere to cash
flow from investing activities by investing in the most efficient capital-intensive assets that
have very low cash outflow in terms of maintenance but enhance operational efficiency.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirement for the Award of Degree of Master of Business Administration (Finance), Kenyatta University, May 2023.
Keywords
Cashflow Management Activities, Financial Performance, Financial Performance of Manufacturing Firms, Manufacturing Firms, Nairobi Securities Exchange, Kenya