The Effect of Liquidity on Profitability of Listed Investment Firms in Kenya

Abstract

This study sought to determine the effect of liquidity on profitability of listed investment firms in Kenya based on a correlational research design. It involved all 7 listed investment firms in Kenya between 2013 and 2022 (Appendix I). The study adopted secondary data from the annual reports of the listed investment firms sourced from the Nairobi Securities Exchange. The data collection sheet was used to collect data on total assets, current assets, fixed assets, current liabilities, total equity and net profit. The study adopted both regression and descriptive statistics for analysis. Diagnostics of normality test, homoscedasticity test, and Multicollinearity were done.The significance of the model was checked using F-statistics from the analysis of Variance (Anova). The study found that liquidity had a positive significant regression coefficient similar to capital structure and firm size. However, asset tangibility had a negative and insignificant regression coefficient. The study concludes that liquidity, capital structure and firm size have a positive effect on profitability of listed investment firms in Kenya. The study also concludes that asset tangibility had an insignificant effect on profitability of listed investment firms in Kenya. The study recommends that listed investment firms in Kenya increase their liquidity, equity ratio and total value of assets. However, it recommends that listed investment firms in Kenya reduce the level of fixed assets in their asset portfolio. The study recommends similar research based on other influencers of profitability, other firms, different measures of variables, primary data, quarterly or semi-annual data and different period of study.