Financial Management and Financial Performance of Firms Listed under Manufacturing and Allied Sector at the Nairobi Securities Exchange, Kenya

Abstract

The success of any organization depends on sound financial management, some of the major financial management practices that determines the success or failure of an organization are include: the level of working capital investment, Investment decisions, and the financing decisions. However, the effect of these variables on financial performance of manufacturing firms listed at the Kenyan stock market was largely unclear hence the basis of this study. This study sought to achieve the following specific objectives: To determine the effects of working capital investment, capital structure and capital investment on financial performance of firms listed under the manufacturing and allied sector at the Nairobi Securities Exchange, Kenya. Data was analyzed using descriptive analysis and panel regression analysis. The target population of interest in this study constituted all companies listed under manufacturing and allied at the NSE for the period of five years from 2011 to 2016. The study used both primary and secondary data. The study found that working capital, capital structure and capital investment singly have a positive and significant effect on the financial performance of the firms studied. The study concluded that working capital is important to the financial performance of manufacturing and allied sector at NSE because the current assets of a typical manufacturing firm accounts for over half of its total assets. In view of capital structure, the study concluded that a well-balanced capital structure provides an organized way for the firms in the manufacturing and allied sector to raise capital and also provides flexibility in raising funds. The study concluded that through capital investment, firms in the manufacturing and allied sector at NSE invest to acquire capital assets in order to generate benefits over a series of years in future and should pursue product diversification investment strategies in order to broaden their revenue base.