EFFECT OF LIQUIDITY ON FINANCIAL PERFORMANCE OF STAR RATED HOTELS IN NAIROBI COUNTY, KENYA
EFFECT OF LIQUIDITY ON FINANCIAL PERFORMANCE OF STAR RATED HOTELS IN NAIROBI COUNTY, KENYA
Mugambi Pamela Makena - School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya
Muturi Willy (PhD) - School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya
Njeru Agnes (PhD) - School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
Capital structure is among the most significant financial decisions in business financing strategy. It encompasses the choice of equity and debt level in financing business operations. This study aimed to observe the effect of capital structure determinants in the hotel industry and how this can influence their financial performance. Specifically, the study sought to determine the effect of liquidity on financial performance of hotels. The hotel industry was chosen because of its importance in the Kenyan economy as well as this particular industry hardly having been studied in relation to its capital structure determinants and their effect on financial performance. This study used explanatory research design and utilised secondary panel data extracted from the financial statements of the target population, which is 40 star rated hotels. From the study results, it was found that liquidity has positive and significant effect on financial performance of star rated hotels in Nairobi. This shows an increase in liquidity enhanced financial performance of star rated hotels in Nairobi County. This indicates that the proportion of current assets did not constrain the operational capacity of respective star rated hotels. It can therefore be concluded that working capital strategies deployed by respective star rated hotels enhanced their operational capacity and maximized shareholders wealth.
