An Assessment of Liquidity and Shareholders’ Earnings of Listed Firms at The Nairobi Securities Exchange, Kenya

Abstract

The global changes in the business environment and the increased demand for improved shareholder’s earnings have prompted big firms to re-examine their liquidity levels. During the 2008 global economic crisis, many big institutions experienced liquidity challenges which led to the decline in the earnings of shareholders. The current study was therefore necessary to analyse the effect of liquidity on shareholders earnings of listed firms at the Nairobi Securities Exchange. The liquidity theories, were used to guide the research. A descriptive research design was used in this study. The study’s target population was all listed companies on the Nairobi Securities Exchange over the period 2015 to 2021. The 64 companies were analyzed using the census study. Data had been collected using a secondary data collection sheet. The study employed secondary data obtained from the published financial statements of the respective firms, from the Nairobi Securities Exchange and the Capital Markets Data. A panel regression model was employed in the analysis of data with the aid of the stata version 14. The study found out that Liquidity had a positive significant effect on the shareholders earnings. The study recommends that listed firms should enhance its liquidity by investing more on liquid assets. This should entail more investments in treasury bills, treasury bonds and other liquid stocks. They should also diversify their investments by investing in money markets. Additionally it should enhance its liquidity by controlling its overheads through getting rid of unnecessary expenses. Secondly, the listed firms need to expand its asset base.