The Nexus Between Cash Management and the Financial Performance of Listed Construction and Manufacturing Firms in Kenya
Main Article Content
Keywords
Financial performance, cash management, construction and manufacturing firms
Abstract
This study was motivated by the growing empirical discussion surrounding cash management and financial performance, specifically focusing on publicly listed construction and manufacturing companies in Kenya. The existing empirical literature exhibits a lack of consensus and inconclusive findings due to contextual and methodological variations. The study examined the effect of cash management on financial performance of listed construction and manufacturing firms in Kenya. The study used a longitudinal panel approach and an explanatory research design to sample 10 firms from 2008 to 2022.The Hausman test was used to determine whether fixed effects or random effects should be chosen. Hence, the random effect model was deemed appropriate for the study. The findings of this paper revealed that cash management had a positive and statistically significant (β= 0.268, ρ<0.05) effect on the financial performance of firms. The findings of this study provide valuable information for managers to customize their approaches to cash management. Implementing this customized strategy can result in enhanced financial performance, hence improving the overall efficacy of the firm. This study advances existing knowledge by integrating cash conversion cycle theory, transaction cost theory, and agency theory to clarify the complexities of cash management in firms in Kenya's construction and manufacturing sectors. The findings imply that policymakers should acknowledge the significance of cash management in financial roles and support systems for construction and manufacturing firms. Standardizing policies that encourage improved practices in managing cash.
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Boisjoly, R. P., Conine Jr, T. E., & McDonald IV, M. B. (2020). Working capital management: Financial and valuation impacts. Journal of Business Research, 108, 1-8. https://doi.org/10.1016/j.jbusres.2019.09.025
Chepngeno, D., Langat, P., & Cheruiyot, P. (2023). The Relationship Between Cash Management and the Financial Performance of Unilever Tea Limited, Kericho County, Kenya.
Coad, A. (2018). Firm age: a survey. Journal of Evolutionary Economics, 28, 13-43.
Coad, A., Holm, J. R., Krafft, J., & Quatraro, F. (2018). Firm age and performance. Journal of Evolutionary Economics, 28, 1-11. https://doi.org/10.1007/s00191-017-0532-6
Dalci, I. (2018). Impact of financial leverage on profitability of listed manufacturing firms in China. Pacific Accounting Review, 30(4), 410-432. https://doi.org/10.1108/PAR-01-2018-0008
Dang, C., Li, Z. F., & Yang, C. (2018). Measuring firm size in empirical corporate finance. Journal of banking & finance, 86, 159-176. https://doi.org/10.1016/j.jbankfin.2017.09.006
de Goeij, C., Gelsomino, L. M., Caniato, F., Moretto, A. M., & Steeman, M. (2021). Understanding SME suppliers' response to supply chain finance: a transaction cost economics perspective. International Journal of Physical Distribution & Logistics Management, 51(8), 813-836. https://doi.org/10.1108/IJPDLM-04-2020-0125
Dibie, R. (2022). Cash Management and Financial Performance of Listed Manufacturing Firms in Nigeria. International Accounting and Taxation Research Group, Faculty of Management Sciences, University of Benin, Benin
City, Nigeria. https://doi.org/10.1108/IJPDLM-04-2020-0125
Gelb, A., Ramachandran, V., Meyer, C. J., Wadhwa, D., & Navis, K. (2020). Can Sub-Saharan Africa be a manufacturing destination? Labor costs, price levels, and the role of industrial policy. Journal of Industry, Competition and Trade, 20, 335-357. https://doi.org/10.1007/s10842-019-00331-2
Habib, A. M., & Dalwai, T. (2024). Does the efficiency of a firm’s intellectual capital and working capital management affect its performance? Journal of the Knowledge Economy, 15(1), 3202-3238. https://doi.org/10.1007/s13132-023-01138-7
Husna, A., & Satria, I. (2019). Effects of return on asset, debt to asset ratio, current ratio, firm size, and dividend payout ratio on firm value. International Journal of Economics and Financial Issues, 9(5), 50-54. https://doi.org/10.32479/ijefi.8595
Huynh, T. X. T., Nguyen, T. T. H., & Nguyen, C. V. (2025). The impact of working capital management on the financial performance of listed enterprises: an empirical evidence from Vietnam. Cogent Business & Management, 12(1), 2473033. https://doi.org/10.1080/23311975.2025.2473033
Jonah, N. M. (2023). Cash Management Practices and Financial Performance of Listed Brewery Companies in Nigeria. Nigerian Journal of Management Sciences Vol, 24(2a).
Kabuye, F., Kato, J., Akugizibwe, I., & Bugambiro, N. (2019). Internal control systems, working capital management and financial performance of supermarkets. Cogent Business & Management. https://doi.org/10.1080/23311975.2019.1573524
Keinan, A. S., & Karugu, J. (2018). Total quality management practices and performance of manufacturing firms in Kenya: Case of Bamburi Cement Limited. International Academic Journal of Human Resource and Business Administration, 3(1), 81-99. http://www.iajournals.org/articles/iajhrba_v3_i1_81_99.pdf
Khan, K. I., Qadeer, F., Mata, M. N., Dantas, R. M., Xavier Rita, J., & Martins, J. N. (2021). Debt market trends and predictors of specialization: an analysis of Pakistani corporate sector. Journal of Risk and Financial Management, 14(5), 224. https://doi.org/10.3390/jrfm14050224
Kyere, M., & Ausloos, M. (2021). Corporate governance and firms financial performance in the United Kingdom. International Journal of Finance & Economics, 26(2), 1871-1885. https://doi.org/10.1002/ijfe.1883
Mahmood, F., Shahzad, U., Nazakat, A., Ahmed, Z., Rjoub, H., & Wong, W.-K. (2022). The nexus between cash conversion cycle, working capital finance, and firm performance: Evidence From Novel Machine Learning
Approaches. Annals of Financial Economics, 17(02), 2250014. https://doi.org/10.1142/S2010495222500142
Mandipa, G., & Sibindi, A. B. (2022). Financial performance and working capital management practices in the retail sector: empirical evidence from South Africa. Risks, 10(3), 63. Doi:https://doi.org/10.3390/risks10030063
Mitnick, B. M. (2019). Origin of the theory of agency: an account by one of the theory's originators. Available at SSRN 1020378. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1020378
Mmaduka, R. U., Udeh, F. N., Amahalu, N. N., & Obi, J. C. (2022). Effect of cash conversion cycle on capital structure of quoted manufacturing firms in Nigeria. International Journal of Management Studies and Social Science Research, 4(1), 30-43. https://ijmsssr.org/paper/IJMSSSR00599.pdf
Mugisha, H., Omagwa, J., & Kilika, J. (2021). Capital structure, market conditions and financial performance of small and medium enterprises in Buganda Region, Uganda. International Journal of Research in Business and Social Science (2147-4478), 10(3), 276-288. https://doi.org/10.20525/ijrbs.v10i3.1153
Mutua, L. M., & Atheru, G. K. (2020). Capital Structure and Financial Performance of Companies listed under Manufacturing and Allied Sector at Nairobi Securities Exchange in Kenya. Journal of Finance and Accounting, 4(1), 24-38.
Naz, M. A., Ali, R., Rehman, R. U., & Ntim, C. G. (2022). Corporate governance, working capital management, and firm performance: Some new insights from agency theory. Managerial and Decision Economics, 43(5), 1448-1461. https://doi.org/10.1002/mde.3466
Ndirangu, P. (2021). Effect of working capital management and firm characteristics on financial performance of listed agriculture firms in Kenya. Unpublished Masters Thesis, Strathmore University, http://hdl.handle.net/11071/12692
Ndubisi, N. O., Zhai, X. A., & Lai, K.-h. (2021). Small and medium manufacturing enterprises and Asia's sustainable economic development. International Journal of Production Economics, 233, 107971. https://doi.org/10.1016/j.ijpe.2020.107971
Nguyen, A. H., Pham, H. T., & Nguyen, H. T. (2020). Impact of working capital management on firm's profitability: Empirical evidence from Vietnam. The Journal of Asian Finance, Economics and Business, 7(3), 115-125. https://doi.org/10.13106/jafeb.2020.vol7.no3.115
Nyakundi, J. (2021). Financial Planning Practices And Financial Performance of Manufacturing Companies Listed in Nairobi Security Exchange, Kenya. University of Nairobi, Nyakundi, J. (2021). Financial Planning Practices And Financial Performance of Manufacturing Companies Listed in Nairobi Security Exchange, Kenya. University of Nairobi. https://erepository.uonbi.ac.ke/handle/11295/160818
Odo, S. I., & Udodi, J. N. (2022). Influence of cash management on financial performance of selected manufacturing companies in Nigeria. Contemporary Journal of Banking and Finance, 3(6), 26-41. https://eprints.gouni.edu.ng/id/eprint/3550
Okoth, O. F. B., Githui, T., & Osoro, C. (2024). Working Capital Management and Financial Performance of Listed Manufacturing Firms in Kenya. Cuea Journal of Business and Economics, 2(1). https://journal.cuea.edu/ojs1/index.php/cjb/article/view/51
Onyari, J. M. (2023a). Influence of working capital management on financial performance of small and medium manufacturing enterprises in Nyamira County, Kenya. (Unpublished Masters Thesis). Africa Nazarene University, Nairobi. Retrieved from http://repository.anu.ac.ke/handle/123456789/950
Onyari, J. M. (2023b). Influence of working capital management on financial performance of small and medium manufacturing enterprises in Nyamira County, Kenya. Africa Nazarene University, http://repository.anu.ac.ke/handle/123456789/950
Onyekwelu, U. L., Chukwuani, V. N., & Onyeka, V. N. (2018). Effect of liquidity on financial performance of deposit money banks in Nigeria. Journal of Economics and Sustainable Development, 9(4), 19-28.
Oriekhova, K., & Golovko, O. H. (2022). Cash flow management strategy. Economics and Law(1 (64)), 89-97. https://doi.org/10.15407/econlaw.2022.01.089
Ouma, O. S. (2021a). Effect of Cash Management on the Financial Performance of Small and Medium Business Enterprises in Nairobi County, Kenya. (Unpublished Masters Degree). University of Nairobi, Nairobi. http://erepository.uonbi.ac.ke/handle/11295/162404
Ouma, O. S. (2021b). Effect of Cash Management on the Financial Performance of Small and Medium Business Enterprises in Nairobi County, Kenya. (Unpublished Masters Thesis). University of Nairobi, Nairobi. Retrieved from http://erepository.uonbi.ac.ke/handle/11295/162404
Peng, J., & Zhou, Z. (2019). Working capital optimization in a supply chain perspective. European Journal of Operational Research, 277(3), 846-856. https://doi.org/10.1016/j.ejor.2019.03.022
Pervan, M., Pervan, I., & Ćurak, M. (2019). Determinants of firm profitability in the Croatian manufacturing industry: evidence from dynamic panel analysis. Economic research-Ekonomska istraživanja, 32(1), 968-981. https://doi.org/10.1080/1331677X.2019.1583587
Pirttilä, M., Virolainen, V. M., Lind, L., & Kärri, T. (2020). Working capital management in the Russian automotive industry supply chain. International Journal of Production Economics, 221, 107474. https://doi.org/10.1016/j.ijpe.2019.08.009
Prasad, P., Narayanasamy, S., Paul, S., Chattopadhyay, S., & Saravanan, P. (2019). Review of literature on working capital management and future research agenda. Journal of Economic Surveys, 33(3), 827-861. https://doi.org/10.1111/joes.12299
Rosyadah, K., Mus, A. R., Semmaila, B., & Chalid, L. (2022). The relevance of working capital, financial literacy and financial inclusion on financial performance and sustainability of micro, small and medium-sized enterprises (MSMEs). American Journal of Humanities and Social Sciences Research (AJHSSR), 4(12), 203-216.
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Published
Aug 4, 2025
Article Details
How to Cite
Kirwa , J., Kapkiyai , C., & Tarus , J. (2025). The Nexus Between Cash Management and the Financial Performance of Listed Construction and Manufacturing Firms in Kenya. Journal of Business, Economics and Management Research Studies, 3(2), 64–83. https://doi.org/10.69897/jobemrs.v3i2.257
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Author Biographies
Joshua Kirwa , School of Business and Economics, Department of Accounting and Finance, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
School of Business and Economics, Department of Accounting and Finance, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
Collins Kapkiyai , School of Business and Economics, Department of Accounting and Finance, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
School of Business and Economics, Department of Accounting and Finance, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
John Tarus , School of Business and Economics, Department of Accounting and Finance, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
School of Business and Economics, Department of Accounting and Finance, Moi University, P. O. Box 3900-30100, Eldoret, Kenya