Effect of Cash Management Practices on Performance of Manufacturing Firms Listed at the Nairobi Securities Exchange, Kenya

Abstract

Managing cash in a business is to manage the ability of the entity/firm to acquire assets, service business debts, meet running expenses and control operations which effectively translates to proper cash management practices which correlates with firms’ ability towards the realization of the mission, goals, and objectives. This study therefore aimed at examining the effect of cash management practices on performance of manufacturing firms listed at the Nairobi Securities Exchange, Kenya with the main focus on cash internal controls, and cash and cash equivalents as some of the study independent variables. While performance of manufacturing firms listed at the Nairobi Securities Exchange, Kenya was the dependent variable to be measured using return on assets ratio. The study referred to Monetary Theoretic Approach to Cash Management, and Financial Theoretic Approach to Cash Management as the main study theories. A correlational research design was adopted by the study while dealing with the research objectives with the scope of the study set to cover seven (7) listed firms as per the CMA records under the manufacturing and Allied sector at the NSE. Data was obtained through downloading the audited and published financial statements of the listed manufacturing firms covering the seven year period running from 2015 to 2021, as approved by the capital Markets Authority. Data analysis was carried out using the Statistical Package for Social Sciences version 24 and Microsoft Excel spreadsheet in respect to the study objectives. A multiple regression model and Pearson’s correlation together with the ANOVA test was used in the data analysis and for making summary, conclusions and recommendations from the findings. The study findings revealed the existence of a statistically significant effect for independent variables on performance of the listed firms. The study further made recommendations on each of the variables for management consideration in future decision making processes. The study findings are expected to be of great assistance to management of listed manufacturing firms as well as other business entities in relation to cash management practices. The results will also add to the existing knowledge on cash management practices and provide scholars and future researchers with necessary literature review for future further research. Keywords: [Cash Management Practices, Cash Internal Controls, Cash and Cash Equivalents, Performance]