The Effect of Working Capital Management on Share Returns of Companies Listed in the Nairobi Securities Exchange

Abstract

This study investigated the relationship between working capital management and share returns of the 64 companies listed on the Nairobi stock exchange for the period 2010 to 2014. A census methodology was used to select the companies for study. Secondary data was collected for share prices from the NSE handbook while working capital data was obtained from the audited financial statements of the listed companies and data was analyzed using SPSS. The study found a negative but insignificant relationship between average collection period and share returns while there was a positive but insignificant relationship between average payment period and share returns, and cash conversion cycle and share returns. The study recommends that even though there was no significant relationship between working capital and share returns, managers should pay attention to working capital performance as deterioration of performance on working capital could result in significant effect on share returns.