A survey of excess cash management practices for companies listed at the Nairobi Stock Exachange
Majiwa, Catherine O
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Cash management, a long neglected aspect of financial management has received increasing attention from both practitioners and academicians in recent years. The high and volatile interest rates and increased taxation have increased the opportunity cost of holding idle excess cash. The survey provides an opportunity to capture the dynamic nature of cash management practices and the environment in which they operate. More specifically the objective of this study was to assess the excess cash management practices of companies listed in the Nairobi Stock Exchange. To satisfy the objective of the study, the data was collected from 23 non - financial institutions listed in the NSE using questionnaires. The data was analyzed by the use of Statistical Packages of Social science (SPSS). The results have been presented in the form of frequency tables, means, standard deviations and percentages. The study also made use of the market - to - book ratio to identify undervalued or overvalued securities. The findings of this survey are that 87 % of the companies listed in the stock exchange had their shares over valued. Commercial papers were the most preferred marketable securities followed by treasury bills and repurchase agreements .The study further revealed that treasury bills, on the other hand, seems to have lost their appeal to cash managers, due to their low yield, despite the overall in financial markets. 'Preservation of capital' was found to be the most important factor that was taken into consideration when deciding which marketable securities to invest in. irrespective of the size of the investment.