Effects of Financial Management Practices on Financial Performance of Large Construction Companies in Nairobi County, Kenya.

Abstract

Financial management practices refers to the various activities and processes that ensure that funds and resources are controlled. The profitability and the returns will be adversely being affected if there exist poor management practices irrespective weather the firm is being managed by the core owners or the hired management. It is for this reason that this study was conducted. The general objective of the study was to establish the effect of financial management practices on performance of construction companies in Nairobi County, Kenya. This study was based on three theories the agency theory, the institutional theory and the complexity theory. The study adopted the descriptive research design. The target population of this study were all construction companies that are duly registered by the National Construction Authority. The study has a sample size of one hundred and thirty none construction companies. The study adopted both descriptive and inferential statistics. This study attained a response rate of 79%. The primary data revealed that financial reporting, working capital management, internal control and financial planning affects performance of construction companies in Kenya. Inferential statistics revealed that financial reporting, working capital management, internal control and financial planning had a positive and significant effect on performance of construction companies in Kenya. The study recommends that construction firms should adhere to reporting standards, establish a robust internal control systems, practice optimal working capital management and establish a robust framework for financial planning.