EFFECTS OF LIQUIDITY MANAGEMENT PRACTICES ON VALUE OF LISTED MANUFACTURING FIRMS AT NAIROBI SECURITY EXCHANGE IN KENYA.

Abstract

In Kenyan Manufacturing firms have become an important contributor to the economy. The sector contributes to the national objective of creating employment opportunities and generating income for the economy. There has been poor performance in manufacturing firms in general as evidenced by the stagnated growth of the sector over the last decade and closure of or relocation of operations by some manufacturers’ as reported by Kenya Association of Manufacturers. Liquidity challenges among manufacturing firms has been an issue over time and again. The general objective of this study was to determine the effects of liquidity management practices on value of manufacturing firms listed at Nairobi Security Exchange in Kenya. This study was guided by the following specific objectives to determine the effect of inventory management practices on value of listed manufacturing firms at Nairobi Security Exchange in Kenya, to establish the effect of accounts receivable management practice on value of listed manufacturing firms at Nairobi Security Exchange in Kenya, to determine the effect of accounts payable and practices on value of listed manufacturing firms at Nairobi Security Exchange in Kenya and to establish the moderating effect of conversion cycle on the relationship between liquidity management practices and value of manufacturing firms listed at Nairobi Security Exchange in Kenya. The study will apply survey research design. Target population of 8 manufacturing firms whereby census will apply. Secondary data will be obtained for a 5 year period of 2017-2021 financial years. Data will be analyzed using inferential statistics and will be presented through tables. The study found all the variables to be positive and significant thus inventory management practices p-value (0.0018), accounts receivable management practice p-value (0.0317), accounts payable management practice (0.0441), Cash Conversion Cycle (0.016). Therefore the null hypothesis Ho3-Ho4: were all rejected. The study concluded that inventory management practice, accounts receivable management practice and accounts payable management practice have a significant effect on value of listed manufacturing firms at Nairobi Security Exchange in Kenya. Cash Conversion Cycle had a moderating effect on liquidity management practices and Value of Manufacturing firms. The study recommends that since inventory management practice has a significant effect on value of manufacturing firms it is important for manufacturing firms to monitor the opening and closing inventories for efficiency purposes. The study recommends that credit sales and cash sales should be checked to ensure that accounts receivable management practice is effective. The study recommend monitoring of credit purchases along cash purchases this will lead to an effective payables management practice for manufacturing firms. The study recommends consistency and accuracy on days used to convert stock to cash. This will help in managing cash conversion cycle process.