CASH MANAGEMENT AND FINANCIAL PERFORMANCE OF PUBLIC UNIVERSITIES IN KENYA
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Mar 15, 2023
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Abstract
The financial performance of Kenyan universities has been declining to recent time where most of the universities reported deficits in their income statement, following the dwindling revenues universities are in a deep financial crisis that can possibly lead some of them to a halt. Auditor General declared 11 universities insolvent in a report to Parliament for financial year (2017/2018). Proper cash management is essential for any organizational survival. This is because an institutions’ inability to identify relevant cash management practices can be its source of inability to perform. The general objective of this study was to determine the Effect of cash management on financial performance of public universities in Kenya, which was guided by the following independent variables; effect of cash ratio management on financial performance of public universities in Kenya, effect of operational cash flow management on financial performance of public universities in Kenya, effect of cash budget management on financial performance of public universities in Kenya and the effect of student enrollment on the relationship between Cash management on financial performance of universities in Kenya . The study was anchored on operating cycle theory, liquidity theory and Baumol’s Cash Management Model. The scope of the study was based on public universities in Kenya for period between years 2016 to 2019. Existing literature was reviewed in details in chapter two of the study. Quantitative research design was used in this study. The study population was 31 accredited public universities in Kenya. Secondary data was collected from the auditor general’s office. The study found that cash management affects financial performance of public universities in Kenya. The study revealed that student enrolment moderates the relationship between cash management and financial performance of public universities in Kenya. The study concluded that cash management plays a significant role in financial performance of public universities in Kenya. The study therefore recommended that all public universities embrace prudent cash management in order to have sound financial performance.
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References
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Aggarwal, J.D. (1988). A goal programming model for working capital management. Finance Journal India, 2(1), 16-25.
Aksoy, A. (2005). Working capital management. (1st Ed.). Ankara, Turky: Gazi Publications.
Alshubiri, F.N. (2011). The effect of working capital practices on risk management: Evidence from Jordan. Global Journal of Business Research, 5(1), 39-54.
Baumol, W.J. (1952). The transaction demand for cash: An inventory theoretic approach. The Quarterly journal of Economics, 6(4), 25-30.
Bhandari, A.K., & Maiti, P. (2007). Efficiency of Indian Manufacturing Firms: Textile industry as a case study. International Journal of Business Economics, 6(1), 71-88.
Bose, D. C. (2012). Principles of management and administration. Dehli: Phi Learning Private Limited.
Brigham, E.F., & Ehrhardt, M.C. (2004). Financial management: Theory and practice (11th ed.). New York: South-Western College Publishing.
Bryman, A. & Cramer, D. (1997). Quantitative data analysis with SPSS for Windows. London: Routledge.
Castillo, J. (2009). Research Population. Available from: http://www.experiment-resources.com/research-population.html. [Accessed on 15 October 1011]. [Date of Retrieval].
Collis, J. & Hussey, R., (2003). Business research: A practical guide for undergraduates and postgraduates’ students. (2nd ed.). Basingstoke, Hampshire: Palgrave Macmillan.
Cooper, R., & Schindler, P. (2003). Business research methods. Tata: McGraw Hill.
Cote, E.L. (1999). A cash conversion cycle approach to liquidity analysis. Financial Management Journal, 9(1), 32-38.
Chadran, C. (2004). Research methods with illustrations from Christian ministries. Kenya: Star bright Services Ltd.
Chowdhury, A. & Amin, M. (2007). Working capital management practiced in pharmaceutical Companies in Dhaka stock exchange. BRAC University Journal, 4(2), 75-86.
Creswell, J. W. (2003). Research Design: Qualitative, Quantitative and Mixed Methods Approaches (2nd ed.). Thousand Oaks, CA: Sage.
Deloof, M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance and Accounting, 30(3), 573-587.
Dong, H. P., & Su, J. T. (2010). The relationship between working capital management and profitability: A Vietnam case. International Research Journal of Finance and Economics, 49(1), 59-67.
Eljelly, A.M.A. (2013). Liquidity-profitability tradeoff: An empirical investigation in an Emerging Market. International Journal of Commerce & Management, 14(1), 48-61.
Eriksson, P. & Kovalainen, A. (2008). Qualitative methods in business research. London: Sage.
Filbeck, G., & Kruegar, T.M. (2005). An analysis of working capital management results across industries. International Journal of Business, 20(2), 11-18.
Flick, U. (2006). An introduction to qualitative research. London: Sage Publication Inc.
Galliers, R.D. (1991). Choosing appropriate information systems research approaches: A revised taxonomy. North Holland: Elsevier Science Publishers,
Ganesan, V. (2007). An analysis of working capital management efficiency in telecommunication equipment industry. Rivier Academic Journal, 3(2), 116-125.
Huefner R.J. & Gupta, M.C. (2010). A cluster analysis study of financial ratios and Industry Characteristics. Journal of Accounting Research, 10(1), 77-95.
Hampton, J. J., & Wagner, C. L. (2011). Working capital management. New York: John Wiley and Sons.
Hansen, R., & Mowen, M. (2005). Management accounting (7th ed.). Singapore: South-Western.
Harrington, R., & Wilson, D. (1989). Corporate financial analysis. (3rd ed.). Boston: Irwin Inc.
Harris, A. (2005). Working capital management: Difficult but rewarding. Financial Executive Journal, 21(4), 52-53.
Horne, J., & Wachowicz, J. (2000). Fundamentals of Financial Management (11th Ed.). USA: Prentice Hall International Inc.
Hutchinson, P.D., Farris II, M.T., & Andres, S.B. (2007). Cash –to- Cash analysis and Management. The CPA Journal, 77 (8), 42-47.
Irene, T.W.K., & Lee, S.F. (2007). An empirical exploration into optimal working capital Management On public listed companies in Malaysia. Proceedings of the 3rd UNITEN International Business Conference (UIBMC), 16-18 December, Malaysia.
Jelic, M. & Briston, R. (2001). The financial performance of privatized firms: Evidence from three transition economies. Journal of Business Finance & Accounting, 7(4), 9-25.
Jeng-Ren, C., Li, C., & Han-Wen, W. (2006). The determinants of working capital management. Journal of American Academy of Business. 10(1), 149-155.
Jose, M.L., Lancaster, C., & Stevens, J.L. (1996). Corporate returns and cash conversion Cycles. Journal of Economics and Finance, 9(20), 11- 45.
Kithii, J.N. (2008). The relationship between working capital Management and profitability of Companies listed at the NSE. (MBA Research project). University of Nairobi, Kenya.
Iacobucci & Churchill (2002). Business research methods. New York: McGraw-Hill Irwin.
Largay, J., & Stickney, C. (1980). Cash flows, ratio analysis and the W. T. Grant Company bankruptcy. Financial Analyst Journal. 1(12), 51-54.
Lazaridis, J., &Tryfonidis, D. (2006). Relationship between working capital management and profitability of listed companies in the Athens Stock Exchange. Journal of Financial Management and Analysis, 19(1), 26-35.
Leedy, P. & Ormrod, J. (2001). Practical research: Planning and design (7th ed.). Upper Saddle River, NJ: Merrill Prentice Hall. Thousand Oaks: SAGE Publications.
Maness, T.S. & Zietlow, J.T. (2005). Short-term financial management. (3rd ed.). Ohio: South-Western/Thomson Learning.
Marczyk, G.R., DeMatteo, D., & Festinger, D. (2004). Essentials of research design and methodology. Kenya: John Wiley & Sons.
Mathur, S. B. (2002). Working capital management and control: Principles and practice. India: New Age International Pvt Ltd Publishers.
Mathuva, D. (2009). The influence of working capital management components on corporate profitability: A survey on Kenyan listed firms. Research Journal of Business Management, 3(5), 1-11.
Mathuva, D. M. (2010). The Influence of Working Capital Management Components on Corporate Profitability: A Survey on Kenyan Listed Firms. Research Journal of Business Management, 4(1), 1 – 11.
Mcmillan, J. & Schumacher, S. (2006). Research in education evidence–based inquiry. Boston: Pearson Education
Michna, A. (2007). Dimensions of organisational learning and linking them with SME performance, paper presented at the 30th ISBE Conference, International Entrepreneurship, Glasgow, 7-9 November.
Mutungi, M. (2010). The relationship between working capital management policies and financial performance of oil marketing firms in Kenya. (MBA research project). University of Nairobi, Kenya.
Nachmias, R., Nachmias, M. (2008). European Virtual N2L University (EVNU) – Educational ex-change in Nano2Life – A network of excellence. Paper presented at the EDEN 2007 annual conference – NEW LEARNING 2.0? Emerging digital territories developing continuities New divides, Italy.
Naser, K.,& Mokhtar, M. (2004). Determinants of corporate performance of Malaysian companies. Fourth Asia Pacific Interdisciplinary Research in Accounting Conference, Singapore, 1(1), 16-25.
Ngaba, D.K. (1990). Working capital management practices used in the Kenya secondary Schools. (Masters Thesis). University of Nairobi, Kenya.
Nyakundi, M. (2003). A survey of working capital management policies among public companies in Kenya. (MBA Research project). University of Nairobi, Kenya.
Nzuki, V.G. (2010). Managing Price Risk Using Futures: Case Of Oil Companies in Kenya. (Master Thesis). Kenyatta University, Kenya.
Ochieng, A.J. (2006). Relationship Between working capital of firms listed in NSE and the Economic activities in Kenya. (MBA Research project). University of Nairobi, Kenya.
Oketch, H. O. (2000). Micro and small enterprises in Kenya: Agenda for improving the policy environment. Nairobi: ICEG.
Padachi, K. (2006). Trends in Working Capital Management and Its Effect on Firms’ Performance: An Analysis of Mauritian Small Manufacturing Firms”. Retrieved From Http://Www.Emeraldinsight.Com/.
Pandey, I. M. (2008). Financial management. (9th ed.). Vikas Publishing House.
Pinches, G.E. (2011). Essentials of Financial Management (4th ed.). New York: HarperCollins Publishers
Pirasteh, R. M. & Fox, R. E. (2010). Profitability with no boundaries: Optimizing toc and lean-six sigma. North America: ASQ Quality Press.
Preve, L. & Sarria-Allende, V. (2010). Working capital management. UK: Oxford University Press.
Rafuse, M.E. (2014). Working capital management: An urgent need to refocus. Journal of Management Decisions, 34(2), 59-63.
Raheman, A., & Nasr, M. (2007). Working capital management and profitability- A case study of Pakistan firms. International Review of Business Research Papers, 279 - 300.
Ryan, B. (2004). Finance and accounting for business. London: Thomson Learning.
Sagner, J. (2010). Essentials of working capital management. United States: John Wiley & Sons.
Santosuosso, P. (2014). Do efficiency ratios help investors to explore firm performances? Evidence from Italian listed firms. International Business Research, 111-113.
Sarantakos, S. (2005). Social Research. (3rd ed.). Melbourne: Macmillan Education.
Saunders, M., Lewis, P., & Thornhill, A. (2009). Research methods for business students. (5th ed.). Harlow: Pearson Education Limited.
Teruel, P. J. G. & Solan, P. M. (2007). Effect of working capital management on sme profitability. Internatrional Journal of Managerial Finance, (3), 164-177.
Tijani, O. M. & Mathias, G. O. (2013). Derivatives and financial risk management in Nigeria: Evidence from non-financial firms. African Journal of Scientific Research, 11(1).
Van Horne, J. C. (2004). Financial management and policy (11th ed.). Delhi, In: Prentice Hall.
Velnampy, T.(2011). A study on investment appraisal and profitability. Journal of Business Studies. 2(1), 15-45.
Warmbrod, J. R. (2001). Conducting, interpreting, and reporting quantitative research. New Orleans, Louisiana: Research Pre-Session.
Waweru, C.G. (2011). The relationship between working capital management and Value of Companies quoted at the NSE. (MBA Research project). University of Nairobi, Kenya.
Weinraub, H.J. &Visscher, S. (1998). Industry practice relating to aggressive conservative working capital policies. Journal of Financial and Strategic Decision, 11(12), 11-18.
Weston, I. F., & Copeland, T. E. (2011). Managerial Finance. New Yolk: The Dryden Press.
Zikmund, W.G. (2003). Business research methods. (7th ed.). Ohio: South-Western
Aggarwal, J.D. (1988). A goal programming model for working capital management. Finance Journal India, 2(1), 16-25.
Aksoy, A. (2005). Working capital management. (1st Ed.). Ankara, Turky: Gazi Publications.
Alshubiri, F.N. (2011). The effect of working capital practices on risk management: Evidence from Jordan. Global Journal of Business Research, 5(1), 39-54.
Baumol, W.J. (1952). The transaction demand for cash: An inventory theoretic approach. The Quarterly journal of Economics, 6(4), 25-30.
Bhandari, A.K., & Maiti, P. (2007). Efficiency of Indian Manufacturing Firms: Textile industry as a case study. International Journal of Business Economics, 6(1), 71-88.
Bose, D. C. (2012). Principles of management and administration. Dehli: Phi Learning Private Limited.
Brigham, E.F., & Ehrhardt, M.C. (2004). Financial management: Theory and practice (11th ed.). New York: South-Western College Publishing.
Bryman, A. & Cramer, D. (1997). Quantitative data analysis with SPSS for Windows. London: Routledge.
Castillo, J. (2009). Research Population. Available from: http://www.experiment-resources.com/research-population.html. [Accessed on 15 October 1011]. [Date of Retrieval].
Collis, J. & Hussey, R., (2003). Business research: A practical guide for undergraduates and postgraduates’ students. (2nd ed.). Basingstoke, Hampshire: Palgrave Macmillan.
Cooper, R., & Schindler, P. (2003). Business research methods. Tata: McGraw Hill.
Cote, E.L. (1999). A cash conversion cycle approach to liquidity analysis. Financial Management Journal, 9(1), 32-38.
Chadran, C. (2004). Research methods with illustrations from Christian ministries. Kenya: Star bright Services Ltd.
Chowdhury, A. & Amin, M. (2007). Working capital management practiced in pharmaceutical Companies in Dhaka stock exchange. BRAC University Journal, 4(2), 75-86.
Creswell, J. W. (2003). Research Design: Qualitative, Quantitative and Mixed Methods Approaches (2nd ed.). Thousand Oaks, CA: Sage.
Deloof, M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance and Accounting, 30(3), 573-587.
Dong, H. P., & Su, J. T. (2010). The relationship between working capital management and profitability: A Vietnam case. International Research Journal of Finance and Economics, 49(1), 59-67.
Eljelly, A.M.A. (2013). Liquidity-profitability tradeoff: An empirical investigation in an Emerging Market. International Journal of Commerce & Management, 14(1), 48-61.
Eriksson, P. & Kovalainen, A. (2008). Qualitative methods in business research. London: Sage.
Filbeck, G., & Kruegar, T.M. (2005). An analysis of working capital management results across industries. International Journal of Business, 20(2), 11-18.
Flick, U. (2006). An introduction to qualitative research. London: Sage Publication Inc.
Galliers, R.D. (1991). Choosing appropriate information systems research approaches: A revised taxonomy. North Holland: Elsevier Science Publishers,
Ganesan, V. (2007). An analysis of working capital management efficiency in telecommunication equipment industry. Rivier Academic Journal, 3(2), 116-125.
Huefner R.J. & Gupta, M.C. (2010). A cluster analysis study of financial ratios and Industry Characteristics. Journal of Accounting Research, 10(1), 77-95.
Hampton, J. J., & Wagner, C. L. (2011). Working capital management. New York: John Wiley and Sons.
Hansen, R., & Mowen, M. (2005). Management accounting (7th ed.). Singapore: South-Western.
Harrington, R., & Wilson, D. (1989). Corporate financial analysis. (3rd ed.). Boston: Irwin Inc.
Harris, A. (2005). Working capital management: Difficult but rewarding. Financial Executive Journal, 21(4), 52-53.
Horne, J., & Wachowicz, J. (2000). Fundamentals of Financial Management (11th Ed.). USA: Prentice Hall International Inc.
Hutchinson, P.D., Farris II, M.T., & Andres, S.B. (2007). Cash –to- Cash analysis and Management. The CPA Journal, 77 (8), 42-47.
Irene, T.W.K., & Lee, S.F. (2007). An empirical exploration into optimal working capital Management On public listed companies in Malaysia. Proceedings of the 3rd UNITEN International Business Conference (UIBMC), 16-18 December, Malaysia.
Jelic, M. & Briston, R. (2001). The financial performance of privatized firms: Evidence from three transition economies. Journal of Business Finance & Accounting, 7(4), 9-25.
Jeng-Ren, C., Li, C., & Han-Wen, W. (2006). The determinants of working capital management. Journal of American Academy of Business. 10(1), 149-155.
Jose, M.L., Lancaster, C., & Stevens, J.L. (1996). Corporate returns and cash conversion Cycles. Journal of Economics and Finance, 9(20), 11- 45.
Kithii, J.N. (2008). The relationship between working capital Management and profitability of Companies listed at the NSE. (MBA Research project). University of Nairobi, Kenya.
Iacobucci & Churchill (2002). Business research methods. New York: McGraw-Hill Irwin.
Largay, J., & Stickney, C. (1980). Cash flows, ratio analysis and the W. T. Grant Company bankruptcy. Financial Analyst Journal. 1(12), 51-54.
Lazaridis, J., &Tryfonidis, D. (2006). Relationship between working capital management and profitability of listed companies in the Athens Stock Exchange. Journal of Financial Management and Analysis, 19(1), 26-35.
Leedy, P. & Ormrod, J. (2001). Practical research: Planning and design (7th ed.). Upper Saddle River, NJ: Merrill Prentice Hall. Thousand Oaks: SAGE Publications.
Maness, T.S. & Zietlow, J.T. (2005). Short-term financial management. (3rd ed.). Ohio: South-Western/Thomson Learning.
Marczyk, G.R., DeMatteo, D., & Festinger, D. (2004). Essentials of research design and methodology. Kenya: John Wiley & Sons.
Mathur, S. B. (2002). Working capital management and control: Principles and practice. India: New Age International Pvt Ltd Publishers.
Mathuva, D. (2009). The influence of working capital management components on corporate profitability: A survey on Kenyan listed firms. Research Journal of Business Management, 3(5), 1-11.
Mathuva, D. M. (2010). The Influence of Working Capital Management Components on Corporate Profitability: A Survey on Kenyan Listed Firms. Research Journal of Business Management, 4(1), 1 – 11.
Mcmillan, J. & Schumacher, S. (2006). Research in education evidence–based inquiry. Boston: Pearson Education
Michna, A. (2007). Dimensions of organisational learning and linking them with SME performance, paper presented at the 30th ISBE Conference, International Entrepreneurship, Glasgow, 7-9 November.
Mutungi, M. (2010). The relationship between working capital management policies and financial performance of oil marketing firms in Kenya. (MBA research project). University of Nairobi, Kenya.
Nachmias, R., Nachmias, M. (2008). European Virtual N2L University (EVNU) – Educational ex-change in Nano2Life – A network of excellence. Paper presented at the EDEN 2007 annual conference – NEW LEARNING 2.0? Emerging digital territories developing continuities New divides, Italy.
Naser, K.,& Mokhtar, M. (2004). Determinants of corporate performance of Malaysian companies. Fourth Asia Pacific Interdisciplinary Research in Accounting Conference, Singapore, 1(1), 16-25.
Ngaba, D.K. (1990). Working capital management practices used in the Kenya secondary Schools. (Masters Thesis). University of Nairobi, Kenya.
Nyakundi, M. (2003). A survey of working capital management policies among public companies in Kenya. (MBA Research project). University of Nairobi, Kenya.
Nzuki, V.G. (2010). Managing Price Risk Using Futures: Case Of Oil Companies in Kenya. (Master Thesis). Kenyatta University, Kenya.
Ochieng, A.J. (2006). Relationship Between working capital of firms listed in NSE and the Economic activities in Kenya. (MBA Research project). University of Nairobi, Kenya.
Oketch, H. O. (2000). Micro and small enterprises in Kenya: Agenda for improving the policy environment. Nairobi: ICEG.
Padachi, K. (2006). Trends in Working Capital Management and Its Effect on Firms’ Performance: An Analysis of Mauritian Small Manufacturing Firms”. Retrieved From Http://Www.Emeraldinsight.Com/.
Pandey, I. M. (2008). Financial management. (9th ed.). Vikas Publishing House.
Pinches, G.E. (2011). Essentials of Financial Management (4th ed.). New York: HarperCollins Publishers
Pirasteh, R. M. & Fox, R. E. (2010). Profitability with no boundaries: Optimizing toc and lean-six sigma. North America: ASQ Quality Press.
Preve, L. & Sarria-Allende, V. (2010). Working capital management. UK: Oxford University Press.
Rafuse, M.E. (2014). Working capital management: An urgent need to refocus. Journal of Management Decisions, 34(2), 59-63.
Raheman, A., & Nasr, M. (2007). Working capital management and profitability- A case study of Pakistan firms. International Review of Business Research Papers, 279 - 300.
Ryan, B. (2004). Finance and accounting for business. London: Thomson Learning.
Sagner, J. (2010). Essentials of working capital management. United States: John Wiley & Sons.
Santosuosso, P. (2014). Do efficiency ratios help investors to explore firm performances? Evidence from Italian listed firms. International Business Research, 111-113.
Sarantakos, S. (2005). Social Research. (3rd ed.). Melbourne: Macmillan Education.
Saunders, M., Lewis, P., & Thornhill, A. (2009). Research methods for business students. (5th ed.). Harlow: Pearson Education Limited.
Teruel, P. J. G. & Solan, P. M. (2007). Effect of working capital management on sme profitability. Internatrional Journal of Managerial Finance, (3), 164-177.
Tijani, O. M. & Mathias, G. O. (2013). Derivatives and financial risk management in Nigeria: Evidence from non-financial firms. African Journal of Scientific Research, 11(1).
Van Horne, J. C. (2004). Financial management and policy (11th ed.). Delhi, In: Prentice Hall.
Velnampy, T.(2011). A study on investment appraisal and profitability. Journal of Business Studies. 2(1), 15-45.
Warmbrod, J. R. (2001). Conducting, interpreting, and reporting quantitative research. New Orleans, Louisiana: Research Pre-Session.
Waweru, C.G. (2011). The relationship between working capital management and Value of Companies quoted at the NSE. (MBA Research project). University of Nairobi, Kenya.
Weinraub, H.J. &Visscher, S. (1998). Industry practice relating to aggressive conservative working capital policies. Journal of Financial and Strategic Decision, 11(12), 11-18.
Weston, I. F., & Copeland, T. E. (2011). Managerial Finance. New Yolk: The Dryden Press.
Zikmund, W.G. (2003). Business research methods. (7th ed.). Ohio: South-Western