The effect of cash management and firm liquidity on Share prices of companies listed at the Nairobi Securities Exchange

Abstract

Liquidity refers to the ability of a firm to meet its short term and long-term financial obligations as they fall due. Liquidity management is very important for every organization that needs to pay current obligations on business, the payment obligations include operating and financial expenses that are short term but maturing long term debt. The objective of the study was to establish whether cash management and liquidity have an effect on share performance at the Nairobi Securities Exchange (N.S.E). The study was a census study because data was gathered on every member of the population. The population of interest in this study consisted of all the firms quoted at the NSE. There were 59 companies listed at the NSE as at August 2012.This study was facilitated by the use of secondary data, which was obtained at the NSE library and from other financial intermediaries. Secondary data was collected for a period of 5years back dating 2011 December so as to get the prices changes. The data collected was analyzed using multiple regression analysis to estimate the effect of liquidity and cash management on share prices of companies quoted at the NSE. Company’s liquidity had positive influence on share performance at the NSE. The study concludes that liquidity had positive significant influence on share performance; however, cash management had no significant influence on share performance for companies listed on the NSE. The study recommends further analysis of other micro and macro–economic variables that affect share performance could be conducted for companies listed in the NSE. Furthermore, the impact of Liquidity and cash management on intrinsic value share performance could be extended to Small and Medium term enterprises