The Effect Of Financial Management Practices On The Financial Performance Of The Companies Listed At Nairobi Securities Exchange

Abstract

Improper financial management practices have proven to be a main cause of failures in companies in terms of financial difficulty, mismanagements of fund and shortage of long-term funds to meet the operating cost and capital expenditure. The study objective was to determine the effect of financial management practices on the financial performance of the companies listed at Nairobi Securities Exchange. The population of this study comprised 65 companies listed at the Nairobi Securities Exchange as at December 2017 however the researcher managed to obtain information from 42 companies listed at NSE. The study employed primary data by use of semi structured questionnaire which was administered to all 65 companies listed at NSE through a drop and pick method. Only 42 questionnaires where duly filled. Data collected was assembled and reports were produced in form of tables and figures. Data was analyzed on the basis of the mean and the F test statistic was computed at 5% significance by regression analysis. The study conducted an Analysis of Variance (ANOVA). From the findings, the F statistic was 3.276 and was found to be significant. Cash management practices had a t-value of 0.878 which was insignificant, capital budgeting practices had a t-value of -0.520 which was significant and financing practices had a t-value of 2.532 which was significant. The study concluded that financial management practices affect the financial performance of companies listed at Nairobi securities exchange. The study recommends that companies adopt optimal financing decisions which are aimed at increasing their financial performance, firms should embrace financial management practices which translate to growth of their firms to greater heights in terms of the assets base and market share since more sales implies more profitable than smaller sales. Firms with better financial management practices enjoy monopoly power due to market control. Finally, the study recommends that a similar study be conducted but now employ primary and secondary data in the analysis. This will enable comparison with the study which has utilized primary data alone.