Current Assets and Efficiency of Listed Firms in Kenya: Evidence from the Nairobi Securities Exchange
DOI:
https://doi.org/10.53819/81018102t4400Abstract
Firms listed on NSE are key to Kenya’s industrial development through employment creation, value addition, and economic growth. The World Bank lowered Kenya’s growth projection to 4.5% due to rising public debt, higher borrowing costs, and reduced private sector credit access. However, over the last decade, majority of these firms have experienced declining efficiency with a decline in average ROA and over 40% of firms issuing profit warnings between 2015 and 2020, operational cost ratios persistently ranging between 68% and 85%, and multiple firm delisting during 2016–2023 linked to sustained underperformance. Consequently this study assessed effect of current assets on organizational efficiency among firms listed on NSE. The study was guided by Working Capital Management Theory and Capital Asset Pricing Model. Positivist philosophy and explanatory research design informed the study. The target population included all the 66 firms listed on NSE over the study time scope 2013-2024. The study adopted a census approach targeting the 66 firms listed on NSE and used panel data with listed firms at the Nairobi Securities Exchange serving as the unit of analysis. Data analysis was carried out using a combination of descriptive measures, bivariate correlation tests and econometric panel regression models. The findings revealed that Cash conversion cycle had a negative and significant effect on efficiency (β = –0.21487, p = 0.014), while inventory turnover had positive and significant effect of efficiency (β = 0.087451, p = 0.016). In view of these results, the study recommends that the National Treasury, CMA, NSE, and CBK should develop and enforce policy frameworks that promote disciplined asset allocation, affordable financing, transparent asset reporting and stable macroeconomic conditions to enhance operational efficiency among firms listed on the Nairobi Securities Exchange.
Keywords: Current Assets, Firm Efficiency, Cash Conversion Cycle, Inventory Turnover, Nairobi Securities Exchange.
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