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Effect of Working Capital Management Decisions on Financial Performance: Evidence from Kenya’s Tea Sector

Author

Listed:
  • Charles Kiprotich Yegon

    (School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Nairobi)

  • Willy Muturi

    (School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Nairobi)

  • Oluoch Oluoch

    (School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Nairobi)

Abstract

Collapse of companies in Kenya has been on the rise in the recent past. Far reaching endeavors to resuscitate these liquidating and ailing firms have generally been attributed on their corporate financial management decisions. Multinationals and KTDA managed tea firms in Kenya have been performing poorly in the recent past where audited financial statements and reports revealed a warning signal on its financial performance. Specific objectives of the study were to determine the effect of the accounts receivables period, accounts payables period, inventory conversion period, cash conversion cycle, financing policy, investing policy and moderating effect of ownership structure on financial performance. The study illustrated that accounts receivables collection period is negatively related to return on assets (β = -0.1299, p=0.0160), accounts payables payment period is negatively related to return on assets (β = -0.0843, p = 0.0070), inventory conversion period is negatively related to return on assets (β= -0.0623, p=0.0180), cash conversion cycle is negatively related to return on assets (β = -0.1107, p = 0.0030), financing policy is positively related to return on assets (β = 0.1589, p = 0.0000), investing policy is positively related to return on assets (β = 0.0291, p = 0.0000).

Suggested Citation

  • Charles Kiprotich Yegon & Willy Muturi & Oluoch Oluoch, 2021. "Effect of Working Capital Management Decisions on Financial Performance: Evidence from Kenya’s Tea Sector," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(4), pages 127-140, October.
    • Handle: RePEc:rbs:ijfbss:v:10:y:2021:i:4:p:127-140
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    References listed on IDEAS

    as
    1. Satish Kumar, 2015. "The significance of working capital management and its components on SMEs performance - Evidence from India," Proceedings of International Academic Conferences 2503293, International Institute of Social and Economic Sciences.
    2. Greg Filbeck & Thomas M. Krueger, 2005. "An Analysis of Working Capital Management Results Across Industries," American Journal of Business, Emerald Group Publishing, vol. 20(2), pages 11-20.
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