Cashflow Management Strategies and Financial Performance of the Construction And Allied Companies on the Nairobi Securities Exchange, Kenya
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Date
2023-11
Authors
Mwangi, Stanley Mugo
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The construction and allied sector plays a significant role in supporting infrastructural development which is a key pillar in economic development and growth. There were five companies quoted under the construction and allied sector of the Nairobi Securities Exchange by the end of 2022. The companies were all performing well up to the year 2000 and earlier as reflected in their share prices and high dividend payouts. This has however changed as all of them have a decline in share value over last ten years and decreased profitability. The decreased profitability has negatively affected dividend payout to shareholders. Most of the firms have experienced serious financial difficulties and this has led one of them being put under statutory management pending liquidation. Noting the importance of cash flow management in success of enterprises, the study was conceived against limited empirical evidence of effect of cash flow management strategies on financial performance of construction and allied companies listed at Nairobi Securities Exchange. The purpose of the study was to examine the effect cash flow management strategies on financial performance of construction and allied companies listed in the Nairobi Security Exchange. Specifically, the study aimed at determining effect of liquidity management, investing activities and financing activities on financial performance of construction and allied companies listed in the Nairobi Securities Exchange. The study was anchored on the following theories: liquidity preference theory, Baumol inventory model, pecking order theory, and free cash flow theory. Because the small population, the study relied on census data. All five construction and related companies listed on the Nairobi Securities Exchange were investigated. The study relied on secondary data gathered mostly from these companies' publicly available financial records. The research design used was explanatory. Quantitative secondary data was gathered and evaluated utilizing social science statistical software. Metrics of central tendency and dispersion such as the standard deviation and frequency distributions were used to illustrate this data. The research utilized multiple regression equation to examine the relationship between variables in the study and estimate the models for the inquiry. Misconducts such as fabrications, distortion of research effort, and falsification of research data was avoided throughout the study process. The necessary approvals and permits were obtained before commencing the study. Data analysis was undertaken using SPSS version 24. The research found that liquidity management had a positive effect of return on assets. The effect of liquidity ratio on return on assets was significant at 5% level. Investing ratio was found to have a positive effect on return on assets. The effect was significant at 5% level. Financing ratio was found to have a positive influence on return on assets. The effect was significant at 5% level. The research concluded that liquidity management significantly improved financial performance of construction and allied companies listed at Nairobi Securities Exchange. Further it was concluded that investing activities had resulted in significant increase in financial performance. Lastly, it was concluded that financing activities though expected to increase financial performance of construction and allied companies the increase would not be significant. The study recommended managers of construction and allied companies to manage and increase the liquidity level of the companies as this would result in improvement in financial performance. Also they should increase investment in productive assets so as to increase the financial performance of their companies. Further, they should increase the amount of financial leverage as this would result in significant improvement in financial performance
Description
A Research Project Report Submitted to School of Business, Economics and Tourism in Partial Fulfillment of the Requirements of the Award Masters Degree In Business Administration (Finance) of Kenyatta University November, 2023
Keywords
Cashflow Management Strategies, Financial Performance, Construction And Allied Companies, Nairobi Securities Exchange, Kenya