IDEAS home Printed from https://ideas.repec.org/a/rbs/ijfbss/v10y2021i4p127-140.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/1432/1076
    Download Restriction: no
    File URL: https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/1432
    Download Restriction: no
    ---><---

    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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mafumbate J & Ndlovu U & Mafuka A & Gavhure P, 2017. "The Influence of Firm Specific Determinants on Financial Performance in the Power Industry," Journal of Economics and Behavioral Studies, AMH International, vol. 9(5), pages 18-28.
    2. Małgotrzata B. Okręglicka, 2014. "The Economic Recession And Working Capital Management Of Companies In Poland," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 8(1), pages 696-706.
    3. Chauhan, Gaurav Singh, 2019. "Are working capital decisions truly short-term in nature?," Journal of Business Research, Elsevier, vol. 99(C), pages 238-253.
    4. Qureshi, Saad Hassan, 2013. "Consumer Preference of Credit Vs. Debit Card," MPRA Paper 116427, University Library of Munich, Germany, revised 30 Dec 2021.
    5. Szymańska, Elżbieta & Lukoszová, Xenie, 2021. "Liquidity and Profitability of Meat Processing Enterprises in Poland," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 319814, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    6. Ali, Syed Babar & Umyani, Mr. Muhammad Mehdi, 2013. "Capital Structure and Financial Performance: Evidence from Pakistan," MPRA Paper 116404, University Library of Munich, Germany, revised 12 Nov 2022.
    7. Hassan Subhi Al-Abass, 2018. "Effect of Working Capital Management on Profitability of Cement Sector Listed Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(1), pages 137-142, January.
    8. More, Dileep Satappa & Maddali, Ravi Kiran, 2013. "“Status of Supply Chain Finance in FMCG companies- a Benchmarking Approach”," MPRA Paper 51261, University Library of Munich, Germany.
    9. Katerina Lyroudi & Sophia Nema, 2020. "The Effect of the Cash Conversion Cycle on the Z-scores of Fresh Milk Companies in Greece," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 105-137, March.
    10. Rezart Demiraj & Suzan Dsouza & Mohammad Abiad, 2022. "Working Capital Management Impact on Profitability: Pre-Pandemic and Pandemic Evidence from the European Automotive Industry," Risks, MDPI, vol. 10(12), pages 1-21, December.
    11. Jacek Jaworski & Leszek Czerwonka, 2022. "Which Determinants Matter for Working Capital Management in Energy Industry? The Case of European Union Economy," Energies, MDPI, vol. 15(9), pages 1-18, April.
    12. Ivakina, A. & Zenkevich, N., 2018. "Working capital optimization under liquidity constraints in collaborative supply chains," Working Papers 15110, Graduate School of Management, St. Petersburg State University.
    13. Sakınç, İlker, 2018. "A Comparison of Working Capital Components of Turkish And Indian Cement Firms," Bulletin of Economic Theory and Analysis, BETA Journals, vol. 3(4), pages 261-272, December.
    14. Chang, Chong-Chuo, 2018. "Cash conversion cycle and corporate performance: Global evidence," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 568-581.
    15. Julia Koralun-Bereźnicka, 2014. "On the Relative Importance of Corporate Working Capital Determinants: Findings from the EU Countries," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 8(4), December.
    16. Ali, Madiha & Ali, Syed Babar, 2014. "The Impact of Working Capital Management on Firm Profitability and Fixed Investment in Pakistan," MPRA Paper 64520, University Library of Munich, Germany.
    17. Laura A Orobia, 2013. "Gender differences in Working Capital Management amongst Small Business Owners in Uganda," Journal of Economics and Behavioral Studies, AMH International, vol. 5(4), pages 226-236.
    18. Asghar, Maham, 2011. "Role of Micro Finance in Financial Inclusion," MPRA Paper 116387, University Library of Munich, Germany, revised 08 May 2022.
    19. LAMBE, Isaac, Ph.D & ORBUNDE, Bemshima, Ph.D & TION, Williams A. & HARUNA, Dzugwahi, 2022. "Moderating Role of Managerial Ownership on the Effect of Cash Conversion Cycle and Receivable to Payable ratio on Firm Performance in Listed Industrial and Consumer Goods Companies in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(11), pages 868-880, November.
    20. Palombini, Nathalie Vicente Nakamura & Nakamura, Wilson Toshiro, 2012. "Fatores determinantes da gestão do capital de giro no mercado brasileiro," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 52(1), January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbs:ijfbss:v:10:y:2021:i:4:p:127-140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hasan Dincer (email available below). General contact details of provider: https://edirc.repec.org/data/ssbffea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.