CASHFLOW MANAGEMENT ACTIVITIES AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA
CASHFLOW MANAGEMENT ACTIVITIES AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA
Feisal Matan Odhowa - Master’s Student, Kenyatta University, Kenya
Dr. Vincent S. Mutswenje, PhD - Department of Accounting and Finance, Kenyatta University, Kenya
ABSTRACT
The performance of industrial entities contributes significantly to economic development of Kenyan stock market as well as national economy at large. Adoption of cash flow management activities is intended to improve financial performance yet the financial performance of manufacturing firms continues to remain erratic. Hence, it remains unclear whether cash flow management activities significantly affects the performance of industrial entities. Thus, in view of this background, the study sought to assess the influence of cash flow management activities on the financial performance of industrial firms listed at Nairobi securities exchange, Kenya. The specific objectives of the study are: to examine the influence of cash flow management from operating activities, investing activities and financing activities and how they influence financial performance of industrial firms listed at the Nairobi securities exchange, Kenya. Research hypotheses were tested at 0.05 significance level. This study was guided by three theories, which include Keynesian theory of money, Free cash flow theory and cash flow management theory. The study adopted causal research design. The target population comprised eight manufacturing firms listed at the NSE where the study adopted a census. The time scope of the study is five years, that is, year 2017 to year 2021. A data abstraction tool was used to collect secondary data. It adopted the panel regression model. Descriptive statistics (mean and standard deviation) and panel regression analysis was used to analyse data. The diagnostic tests was carried out before the actual analysis. The data was presented using tables, graphs and frequency tables. The study adhered to ethical considerations accordingly. The inferential statistics revealed that cash flow management from operating activities has a statistically insignificant influence on the financial performance of manufacturing firms (p=0.275>0.05). Cash flow management from investing activities was found to have a statistically insignificant influence on financial performance of manufacturing firms (p=0.125>0.05). The findings show however, firm size was not a significant moderator (p=0.562>0.05) in this study. The study suggested that with the establishment of negative correlation on the financial performance, in pursuit of higher profit and better performance the manufacturing firms can utilize management of cash flows, another study was suggested to be done using the same variables but now using the Return on Equity as the dependent variable. The study suggested similar study to be carried out in other sectors.
