INFLUENCE OF FINANCIAL RESTRUCTURING ON PERFORMANCE OF NON-FINANCIAL FIRMS LISTED IN NAIROBI SECURITIES EXCHANGE, KENYA
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Abstract
Non-financial institutions including those listed at the Nairobi securities exchange, Kenya have in the recent past carried out financial restructuring strategies in an attempt to stay afloat in their respective competitive business segments. Corporate failure among companies in Kenya is often associated with the financing decisions of a firm. Numerous strategies for improving the performance of firms have focused on financial restructuring. Some of these restructurings have not turned around the respective firms as per the expectations of stakeholders. The dilemma faced by finance managers is the ability to turn around struggling firms back to profitability. The general objective of this study was to investigate the influence of financial restructuring on the performance of non-financial firms listed in Nairobi Securities Exchange, Kenya. A descriptive research design was adopted for this study. The target population for the study was thirty-nine (39) non-financial firms listed at the Nairobi Securities Exchange, Kenya. Census approach was adopted because the target population is relatively small, consisting of thirty-nine non-financial firms. The sample size consisted of twenty-nine (29) non-financial firms listed at the Nairobi Securities Exchange, Kenya. Secondary data comprised panel data for a ten-year financial period that is from year 2011 to year 2020 as recorded by the Capital Markets Authority; and was collected using a data collection sheet. Data analysis was facilitated by use of STATA software. Correlational research design was used in the analysis. The results of the analyses were presented in tabular and graphical form complemented by relevant explanations and discussions. The study findings indicated that liquidity restructuring; debt restructuring; asset restructuring and interest rate significantly influenced performance of non-financial firms listed in Nairobi Securities Exchange. The findings showed that financial restructuring contributed to 79.2% change in financial performance. This implied that in post restructuring financial restructuring variable notably, current ratio, deb equity ratio and fixed asset ratio had a significant effect on performance of non-financial firms. The study concluded that there is a linear relationship between financial restructuring variables notably, liquidity restructuring measured by current ratio, debt restructuring measured by debt equity ratio and asset restructuring measured by fixed asset ratio and the performance of non-financial firms.
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