The Effects of Liquidity Management on Performance of Financial Institutions Westlands Sub-county

Abstract

The iobjective iof ithe iresearch iwas ito idetermine ithe ieffect iof iliquidity imanagement ion ifinancial iinstitutions using the Nairobi example of Westlands Sub-County. The two theories proposed to form the basis and guidance of the current inquiry are resource-based view theory (RBV) and open system theory (OST). A descriptive research idesign iwas iused ifor this investigation. Descriptive iresearch iis iuseful iin providing answers to queries about what, where, how, when, and how. Among the residents of Westlands, Nairobi, Kenya, there are 62 financial institutions. The study used structured questionnaires ito icollect iprimary idata ifrom istudy participants. The methods of email and drop-and-pick were employed to manage the data collection apparatus. To examine the data, iboth idescriptive iand iinferential istatistics iwere iapplied. iThe iresearch ifindings irevealed ithe ifollowing: iThe imodel isummary itable iindicates ia iR isquare ivalue iof i0.839. iThis indicates that about 83.9% of the variation in the institutions' performance may be attributed to firm size, risk management, and liquidity management. The F statistic for the model was discovered to be 12.278 at the 0.000 significance level. This demonstrates that the regression model, which fits the data well for explaining performance variation, is highly influenced by the three model variables: risk management, liquidity management, and business size. According to the paper, financial institutions should efficiently manage their liquidity. Institutions should carefully consider keeping a well-rounded mix of investments and liquid assets in order to optimize liquidity. Modern technology for real-time monitoring and regular evaluation of liquidity management plans in response to market situations can both lead to increased flexibility. Furthermore, encouraging a proactive approach to liquidity risk that include scenario analysis and stress testing would bolster the institution's overall resilience. Furthermore, the research indicates that the implementation of efficient risk management tactics is vital for sustained prosperity. Financial institutions have to make investments in thorough frameworks for risk management that address a range of risk scenarios. Establishing a corporate culture that is cognizant of risks and offering continuous training to staff members can help the organization be protected against them. Furthermore, by utilizing technology-based methods for risk assessment, monitoring, and mitigation, institutions may navigate a changing risk environment more skillfully. The paper recommends that the institutions explore several expansion options such joint ventures, mergers, and acquisitions in order to maintain operational effectiveness and scalability. Extensive due diligence has to be finished before expansion plans are implemented. Furthermore, fostering innovation in goods and services and matching growth plans with principles would make the financial sector more resilient and competitive.