THE LIQUIDITY FACTOR IN THE FINACIAL PERFORMANCE OF NON LISTED FINACIAL FIRMS IN KENYA

Abdulkadir Sheikh Ali Banafa

PhD Student Business Administration

JomoKenyatta University of Agriculture and Technology

Dr. Willy Muturi

Jomo Kenyatta University of Agriculture and Technology

&

Dr. Karanja Ngugi

Kenyatta University, Nairobi Kenya

CITATION: Banafa, A. S, Muturi, W & Ngugi, K (2015). The liquidity factor in the financial performance of non listed financial firms in Kenya. International Journal of Finance and Accounting 4 (7), 1-22.

A bstract

Documented evidence available show that non financial firms in Kenya have been recording poor returns and at times make huge losses. Literature available shows that financial performance is known variable on Listed Non financial firms in developed economies. This study sought to establish the effects of liquidity on non financial performance of listed non-financial firms in Kenya. The objective of the study was to assess the effect of liquidity on non financial firms in Kenya. The study also adopted supporting theory for the study objective which addressed the liability management theory. The study used causal research design and the target population constituted 42 listed non - financial firms at the NSE under different categories. The study used secondary panel data contained in the annual reports and financial statements of listed non-financial companies.. The results were presented using descriptive statistics and inferential analysis such as ANOVA. The results of statistical tests shows that liquidity, has positive effect on corporate performance (ROA). The study recommends that financial managers must decide both how much liquidity to hold and the way in which they hold this liquidity. New developments in financial markets such as more liquid derivatives markets complicate these decisions, and the financial crisis highlights their importance. Based on these findings therefore, liquidity management has become an important research topic in corporate finance.

Keywords: Liquidity management Theory, ROA, ANOVA and Nairobi Stock Exchange.

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