The effect of working capital policy on systematic risks of Manufacturing Firms in Kenya listed at Nairobi Securities Exchange

Abstract

The intention of this study was to assess the effect of WCP on systematic risk of manufacturing firms registered at the NSE. Explicitly the objectives were; To look at the effect of AWCP on systematic risk of manufacturing firms listed in NSE; To assess the influence of CWCP on systematic risk. Descriptive research design is used where all the 8 manufacturing firms at NSE as at September 2020 were used. Secondary data that was obtained from NSE reports and the individual company’s reports for a period of 5 years that is 2015-2019 was used. Both descriptive and inferential analysis were adopted in the data analysis. The descriptive statistics included the mean, the maximum, minimum and percentages. Correlation analysis used Pearson’s correlations coefficient and regression analysis on the other hand helped in determining the statistical and significance effect of the independent variables. In regression analysis, the F statistics and the t-statistics was used where the p value was reported. A significance level of 5% was used. Correlations analysis results on the other hand revealed that AWCP was negatively and insignificantly correlated with systematic risk and the regression analysis revealed that AWCP is negatively and significantly related with systematic risk. The management of manufacturing firms is recommended to come up with strategies that will encourage a more AWCP in their firms which is negatively related with systematic risk meaning that the systematic risk will be minimal for such companies that adopt the policy. The government of Kenya through the Kenya Association for Manufacturers is also recommended put in place policies that guide the operations of manufacturing firms in terms of investment and that will encourage more investment of long-term assets.