The Effect of Short-term Financial Policy on Profitability of Energy and Petroleum Firms Listed on the Nairobi Securities Exchange
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Date
2018Author
Baruthi, Onesmus M
Type
ThesisLanguage
enMetadata
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The main objective of the study was to investigate the effects of short-term financial policies
on profitability of energy and petroleum firms listed on the Nairobi Securities Exchange. A
causal research design was used in this study. Data was analyzed using descriptive statistics to
summarize the study variables. Financial performance measured by return on equity(ROE)
was used as the dependent variable. Key independent variables were short-term investment
and financing policies. Firm size and financial leverage were used as the control variables. All
data analyses were done using IBM SPSS Statistics version 25. Descriptive analysis results
showed that all the study variables had positive mean values. Full and partial correlation
analysis and scatterplot matrix were used to investigate size and direction of the relationships
of all the study variables. Correlation and scatterplot matrix results revealed that all the
independent variables had linear relationship with the firms' profitability. Standard multiple
regression procedure was conducted to investigate the effect of the mean of short-term
financial policies, firm size and financial leverage on return of equity. Both correlation and
multiple regression analysis revealed the presence of multicollinearity between the two the
key independent variables. Multiple regression results revealed that the best model for data
analysis for the studied firms had return on equity as dependent variable, mean of the shortterm
financial policies as key independent variable, financial leverage and firm size as
control variables. The regression results indicated that increase in one unit of mean shortterm
financial policy improved the profitability of the firms by 94.1%. An increase in one unit
of financial leverage improved the profitability of the firms by16.4%. An increase in one unit
of firm size reduced the profitability of the firms by11.4%. All the independent variables
made 45.9% contribution to firms profitability during the study period. The study made policy
recommendation for Capital Markets Authority, financial regulators and finance professional
organisations to improve financial reporting standards to enable effective data analysis by
researchers and financial analysts. Recommendation for further study using the same topic but
including data from unlisted firms and a longer period of study was made.
Publisher
university of nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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