WORKING CAPITAL MANAGEMENT AND FINANCIAL DISTRESS OF NON-FINANCIAL COMPANIES LISTED AT THE NAIROBI SECURITIES EXCHANGE

Financial distress is a common global phenomenon among the corporate entities. Locally, there is overwhelming evidence of firms that have undertaken financial restructuring, delisted from the exchange market, gone into receivership and subsequently liquidated on account of financial distress. This study therefore set out to examine the way in which management of working capital affects financial distress of non-financial firms listed at the Nairobi Securities exchange. In fulfilling this objective, the study sought to establish how cash management, inventory management and accounts receivables management effects financial distress of non-financial firms listed at Nairobi Securities Exchange. The free cash flows theory, Precautionary motive theory, financing advantage theory and liquidity theory formed the theoretical basis of the study. The study adopted longitudinal research design and collected secondary data over ten years period (2009-2018) from a census of the 40 non-financial firms listed in Nairobi Securities exchange. Descriptive statistical analysis was used to obtain the initial overview of the data collected. Inferential statistical analysis was undertaken using the F and t-tests at 95% confidence level. The study found that cash management had a positive and significant effect on the firms’ distress index. Further, the study revealed that inventory holding period was negatively and significantly related to the firms’ financial distress index. The study also showed that suppliers’ payment period had a positive and significant effect on financial distress indicator. The study however depicted a negative but insignificant relationship between receivables period and financial distress. The study recommended that the management of non-financial listed firms should ensure appropriate management of working capital components in order to guard against instances of corporate financial distress JEL: O15; J24; L20 Article visualizations

Market Risk Hedging Strategy and Financial Performance at Nigeria Stock Exchange Listed Banks

The main objective of the study was to determine the Market Risk Hedging strategy and financial performance of listed banks at Nigeria Stock Exchange (NSE). Contingency theory and Agency theory were used to expound on the effect of market risk hedging strategy and financial performance. Longitudinal cross sectional survey research design was adopted. The study’s target population includes all the 28 listed banks at Nigeria stock exchange. Data was collected from 2009 to 2018 for 20 listed banks in Nigeria. The secondary data sources for the period of between 2009 and 2018 were collected from Nigeria Stock Exchange and annual reports and accounts of the listed banks. The data was collected from audited financial statements of listed banks and other relevant internal report. Data collected was subjected to diagnosis tests of normality, autocorrelation, multicollinearity, linearity, homoscedasticity, stationarity, fixed and random effects. Correlation analysis was carried out to establish the relationship between the dependent and independent variables. Generalized Least Squares (GLS) regression analysis model was used to establish the relationship and significance between the study variables. The formulated hypotheses were tested. STATA statistical software version 10 was used for data analyses. The study found out that there are positive relationship between market risk hedging strategy and price earnings ratio which is the measure of financial performance of the listed banks at NSE. Based on the findings, the study concluded that Market Risk Hedging Strategies have a significant effect on financial performance of listed banks at NSE. The study recommends that there is need for the listed banks to effectively manage their risk as it was found that risk management positively influence financial performance of listed banks. The study further recommends that there is need for the management of listed banks to constantly check their banks’ exposure to credit risk, insolvency risk, and interest rate sensitivity. Keywords: Market Risk Hedging, Financial Performance. DOI: 10.7176/EJBM/12-15-11 Publication date:May 31st 202

Domestic Savings in Unit Trusts and the Growth of Capital Market in Kenya

Unit trust funds have contributed to the growth of capital market in Kenya and indeed globally. However there is need to determine the specific contribution of unit trust in the growth of capital market; more so, the particular attribute of unit trust that attract the investment. Theoretically it is expected that as unit trust funds grow, capital markets equally grows but empirically there is some substantial growth in capital market though not in equal measure in unit trusts. The study therefore sought to determine the contribution of domestic savings in unit trusts on the growth of capital market. This was undertaken using explanatory non-experimental research design and analysis were carried out using panel data.  A census involving all twenty three (23) unit trust schemes for the period 2009 to 2017 was carried out utilizing secondary data. The variables were analyzed using panel data to determine the relationships of the variables by use of fixed effect model. The study revealed a positive effect of domestic savings to the growth of capital market in Kenya. The findings were presented using a linear type of regression model. The study therefore recommend that greater emphasis be placed on domestic saving in order to benefit from its contribution to the growth of capital market and consequently supporting the economic pillar in Kenya vision 2030. Keywords: capital market, domestic savings, growth and unit trusts. DOI: 10.7176/EJBM/11-16-04 Publication date:June 30th 201

Capital Allocation in Unit Trust and the Growth of Capital Market in Kenya

Unit trust schemes approach capital allocation in different ways depending on where they are in the growth life cycle and their strategic focus on customer growth. An effective capital allocation strategy consistently creates value to investors’ funds and sustainable growth in the capital market. Therefore this makes capital allocation an important issue to investigate particularly in unit trusts in relation to the continuous shifting of business objectives within the capital market. This study is a useful point of reference for investors, fund managers and government agencies. This study therefore sought to establish the position of capital allocation in unit trust on the growth of capital market in Kenya. The study used explanatory non-experimental research design with the analysis being carried out using a panel data.  The entire population involving all the twenty three (23) trust schemes to include all money market, equity and balanced funds managed by the schemes for the period between 2009 to year 2017. The research utilized secondary data because of the small number of unit trusts companies in the NSE and availability of the required data. Secondary data collection sheet was designed and used to collect and record all information necessary on unit trust funds from schemes annual reports, surveys and CMA publications for the period under review. Data were also analyzed using both descriptive statistic and panel multiple regression analysis by means of SPSS Version 21. Both dependent and independent variables were analyzed using panel data to determine the strength and relationships of the variables. The study revealed that Capital allocation contributed positively to the growth of capital market in Kenya. These findings were presented in the forms of a regression model. The study findings is used as a basis to recommend that the unit trust fund managers should actively evaluate the choices when allocating funds since it positively contribute to the growth of capital market. This would contribute to the realization of economic pillars in Kenya vision 2030. Keywords: capital allocation, capital market, growth and unit trusts DOI: 10.7176/RJFA/10-12-01 Publication date:June 30th 201

DOES CAPITAL STRUCTURE HAVE A MEDIATION EFFECT ON OWNERSHIP STRUCTURE AND FINANCIAL CORPORATE PERFORMANCE? EVIDENCE FROM KENYA

The objective of this paper was to determine the mediating effect of capital structure on the relationship between ownership structure and financial performance of non-financial firms listed on the NSE. The target population was forty-two firms; however, only thirty-five firms had consistency of data for a balanced panel regression for the period 2008-2017. The study adopted longitudinal quantitative research design with random-effects GLS and fixed effects models. The ownership structure was measured using managerial, institutional, government and retail ownerships while capital structure was measured using leverage ratio. In addition, financial performance was proxed by ROCE and Tobin’s Q. The analysis revealed that the capital structure has no significant mediating influence on managerial, government, and retail ownerships and financial performance. However, the study confirmed that there is a significant partial mediating effect of capital structure on the relationship between institutional ownership and quoted firm’s financial performance. The study recommends that the government should introduce initiatives that are aimed at attracting more investors since the current market is dominated by institutional investors. Finally, the study confirms stakeholders, stewardship and pecking order theories and rebuts capital structure irrelevancy and agency theories. JEL: D24, O16, O16  Article visualizations

Trading Volume and Fama-French Three Factor Model on Excess Return. Empirical Evidence from Nairobi Security Exchange

The main objective of this paper is to examine the effect of Trading Volume on excess return using the Fama-French three factor model of listed companies in Kenya. The research study employed a Quantitative research design to analyses the effect of Trading Volume on excess returns in Nairobi Security Exchange (NSE) during the period 2006 to 2015. Secondary data was used for this study. The study utilized descriptive statistics, correlation, unit root test, Heteroscedasticity, and Autocorrelation test as diagnostic tests. The regression results revealed that Market premium and Value premium (HML) and Trading Volume have a high explanatory power while the size premium (SMB) has a low explanatory power

CAPITAL STRUCTURE DETERMINANTS AMONG COMPANIES QUOTED IN SECURITIES EXCHANGE IN EAST AFRICA

Abstract Capital structure decision plays an important role in shareholder's wealth maximisation. Poor capital structure decision will result to high overall cost of capital and consequently low capital projects net present values. Based on the need to have firm's optimal capital structure the currents study sought to find the determinants of capital structure among quoted firms in East Africa securities exchange. Specifically, the study aimed; to find out the relationship between profitability and capital structure, to establish the relationship between growth and capital structure, to find out the relationship between firm growth and capital structure, to establish the relationship between firm size and capital structure, to find out the relationship between asset structure and optimal capital structure and to determine the relationship between cost of capital and capital structure. A panel data set of 65 companies which were listed and actively trading over the 2009-2013 period of analysis was analysed using panel data and descriptive analysis. The analysis showed a positive insignificant relationship between profitability, growth, firm size and capital structure and significant positive relationship with asset structure. Further, there was a negative insignificant relationship between cost of capital and capital structure

Factors Affecting Internal Auditor’s Performance in Public Universities in Kenya

The study focused on the factors affecting internal auditors ‘performance in public universities in Kenya. It aimed at achieving the objectives: to determine how the working environment, to assess how the challenges to the independence of internal auditors, to assess the impact of the level of technical competency affects the performance of internal auditors in public universities in Kenya. Thus this study evaluates the effect of working environment,establishes the effect of internal auditor’s independence and the effect of internal auditors competence on the performance of internal auditor in public universities in Kenya. Descriptive research design was applied, with a target population of the chief internal auditors from 31 chartered public universities in Kenya which are registered by the Higher Education ministry. A random simple sampling technique was applied o give the sample size of 31. Primary data was used for analysis. The study found out that the internal auditors working environment, internal audit independence and authority, internal auditor’s technical competence impacted on the performance of internal audit function.The study recommended that auditors should consider complying with professional standards as the most important contributorto internal auditing performance. The management in the public universities should keep organizing seminars and workshops where the internal auditors would be trained frequently by experts either internally or externally

Effect of Board Characteristics on Financial Performance of Non-financial Firms Listed at the Nairobi Securities Exchange

The incongruence between corporate governance and financial performance has resulted in the collapse, liquidation, and diminished profitability of several corporations in Kenya. Instructively, companies have been delisted from the Kenyan bourse as a result of irregularities and failures that curtail their profitability. Specifically, audits have pointed to failures in corporate governance, which highlight the lethargy of directors in addressing agency theory conflicts. In this regard, there is a need for evaluating the impact of board characteristics on corporations listed at the Nairobi Securities Exchange (NSE). Board characteristics such as size, independence, and diversity have a significant influence on a firm’s strategic direction. Globally, numerous studies have investigated the relationship between corporate governance and financial performance. However, there is limited scholarly research to ascertain the role of individual board characteristics on listed firms’ financial performance. Thus, this study’s main objective was to determine the effect of board characteristics on the financial performance of non-financial firms listed at the NSE. A quantitative research was conducted using 26 randomly selected non-financial firms listed on the NSE. Using historical financial data from companies’ financial statements, a correlational and regression analysis was conducted using Return on Equity (ROE) as the dependent variable. Notably, diagnostic tests such as the test for multicollinearity, autocorrelation, normality tests were conducted before the Pearson’s correlation test. Importantly, the Panel Data Model was use to determine the goodness of fit, while the Panel Least Square model was used to select the appropriate model for regression analysis. The Fixed Effect Model was the most suitable model. As a result, the findings showed that board size and independence had statistically insignificant effects on the dependent variable, while board diversity (gender diversity) had a statistically significant influence on the financial performance of non-financial firms listed on the NSE

Effect of Board Characteristics on Financial Performance of Non-financial Firms Listed at the Nairobi Securities Exchange

The incongruence between corporate governance and financial performance has resulted in the collapse, liquidation, and diminished profitability of several corporations in Kenya. Instructively, companies have been delisted from the Kenyan bourse as a result of irregularities and failures that curtail their profitability. Specifically, audits have pointed to failures in corporate governance, which highlight the lethargy of directors in addressing agency theory conflicts. In this regard, there is a need for evaluating the impact of board characteristics on corporations listed at the Nairobi Securities Exchange (NSE). Board characteristics such as size, independence, and diversity have a significant influence on a firm’s strategic direction. Globally, numerous studies have investigated the relationship between corporate governance and financial performance. However, there is limited scholarly research to ascertain the role of individual board characteristics on listed firms’ financial performance. Thus, this study’s main objective was to determine the effect of board characteristics on the financial performance of non-financial firms listed at the NSE. A quantitative research was conducted using 26 randomly selected non-financial firms listed on the NSE. Using historical financial data from companies’ financial statements, a correlational and regression analysis was conducted using Return on Equity (ROE) as the dependent variable. Notably, diagnostic tests such as the test for multicollinearity, autocorrelation, normality tests were conducted before the Pearson’s correlation test. Importantly, the Panel Data Model was use to determine the goodness of fit, while the Panel Least Square model was used to select the appropriate model for regression analysis. The Fixed Effect Model was the most suitable model. As a result, the findings showed that board size and independence had statistically insignificant effects on the dependent variable, while board diversity (gender diversity) had a statistically significant influence on the financial performance of non-financial firms listed on the NSE