THE EFFECTS OF WORKING CAPITAL MANAGEMENT PRACTICES ON THE FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN KENYA
Wambia Wilson Ochieng - PhD Student, Kenyatta University, Kenya
Dr. Ambrose Jagongo - Lecturer, Kenyatta University, Kenya
ABSTRACT
Working capital management affects the financial performance of organizations and therefore requires sound management to balance off the performance and risk of not meeting financial obligations as they fall due. This study sought to explore the effect of working capital management practices on the financial performance of insurance companies in Kenya. Its objectives were to establish the working capital management practices adopted by insurance companies, assess the relationship between working capital management practices and the financial performance of insurance companies, establish the impact of raising the minimum working capital on financial performance of insurance companies and establish the challenges faced by insurance companies in Kenya in working capital management. The study used the descriptive research design. It targeted 47 underwriting managers, chief accountants and finance managers from all the 47 insurance companies in Kenya. Purposively sampling technique was used to select a sample size of 141 respondents. Data was collected using the questionnaire and analyzed using Statistical Package for Social Sciences. This study established that insurance companies used all the three working capital management approaches which are conservative, matching and aggressive practices. Further, it established that the choice of working capital management technique affected the performance of insurance companies. This study concluded that working capital management had positive effect on financial performance of insurance companies. It recommended that a review and adherence to proper recruitment principles to ensure recruitment of competent staff as a long-term strategy of ensuring employee efficiency in task execution.
