Capital structure, liquidity and financial performance of non financial firms listed at the Nairobi Securities Exchange
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Date
2022-02-15Author
Meshack, K. M.
Winnie, N.
Okiro, K. O.
Ochieng, D. E.
Type
ArticleLanguage
en_USMetadata
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This paper examines the effect of capital structure on the financial performance of the and
nonfinancial firms listed at the Nairobi Securities exchange. It also examines how this
relationship is intervened by liquidity. Additionally, it evaluates the existence of
equilibrium\disequilibrium relationship among the variables. The study analyzed unbalanced
panel data sourced from across 53 nonfinancial firms listed at the Nairobi Securities Exchange
covering 2010 to 2017. Total debt to total equity was used for assessing the capital structure of
the listed nonfinancial firms. The indicator of liquidity was asset liquidity and was
operationalized by the ratio of current assets to current liabilities. Financial performance
attribute was operationalized by Tobin’s Q. Analysis of data was done using descriptive
statistics, multiple and simple regression analyses. The study showed that leverage positively and
significantly affected the financial performance of the listed nonfinancial firms. Furthermore,
liquidity has a positive intervening effect on capital structure and financial performance
relationship. The conclusion from the study is that companies should strive to raise their
liquidity as long as it does not cause instability to the firm. This is due to the finding that
liquidity has a statistically significant positive effect on the financial performance of the NSE
listed nonfinancial firms. The study further concludes that company managers should strive to
enhance an optimum balance of current assets and current liabilities in firms because they help
in enhancing a firm’s capability in meeting its current obligations. Furthermore, because it has a
significant positive effect on the financial performance of the NSE listed nonfinancial firms
statistically.
URI
http://uonjournals.uonbi.ac.ke/ojs/index.php/adfj/article/view/892http://erepository.uonbi.ac.ke/handle/11295/160210
Citation
Meshack, K. M., Winnie, N., Okiro, K. O., & Ochieng, D. E. (2022). CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL PERFORMANCE OF NON FINANCIAL FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE. African Development Finance Journal, 1(2), 16-33.Publisher
African Development Finance Journal