Financial Management Practices And Financial Performance Of Non Financial Firms Listed At The Nairobi Securities Exchange Kenya

Some firms listed at the Nairobi Securities Exchange, in the non-financial sector, have continued to record poor performance as evidenced in declining share prices. This study sought to establish the effect of financial management practices on financial performance of non-financial firms listed at the Nairobi Securities Exchange. The independent variables of the study were liquidity, Capital budgeting and Leverage. The main objective of the study was to establish the effect of financial management practices on financial performance of non-financial firms listed at the Nairobi securities Exchange. The study used panel data analysis to establish the relationship between financial management practices and financial performance of non- financial firms listed at the Nairobi securities exchange. A census study was conducted on the non-financial firms. The study used secondary data for a five year period covering year 2010 to 2014. However, some of the non- financial firms were listed or had been suspended in between the study period. Therefore, complete data for the period was collected from financial statements of 34 companies. The data was analyzed using E-views 8. Diagnostic tests were carried out to test for Stationarity, Multicollinearity, and Hausman. Fixed regression analysis was run for two equations. One with inflation included as a moderating variable and the other excluding inflation. With moderation effect of inflation, only capital budgeting was significant at 0.05 significance level while all other variables were insignificant. With exclusion of inflation as a moderating variable, Liquidity with a value β=0.009295 and return on capital employed with a vale β= 1.000236 were significant at 0.05 significance level.