LIQUIDITY RISK MANAGEMENT AND FINANCIAL PERFORMANACE OF STATE OWNED ENTERPRISES IN KENYA
DOI:
https://doi.org/10.47604/ijfa.1407Keywords:
Liquidity Risk Management, Financial Performance, State Owned EnterprisesAbstract
Purpose: The study sought to investigate the effect of liquidity risk management on financial performance of state owned enterprises in Kenya.
Materials and Methods: The study adopted a desktop methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library
Results: The results revealed that the studies done had conceptual framework gap. The study also found out that the study had geographical gap because they were not conducted in Kenya and also had different time scope
Unique contribution to theory, practice and policy: The study will be significant to state owned enterprises, students, general public and State Corporations Advisory Committee as it will offer contributions from both a theoretical and practical perspective. Regulatory bodies such as SCAC as well as the government can utilize the findings from the study to improve on the framework for policy formulation and regulation. The study also recommends the Commercial and manufacturing state Corporations to adopt efficient strategies to improve financial performance through risk management process.
Downloads
References
Abeywardena,I.S., Raviraja, S., &Tham, C.Y. (2012). Conceptual framework for parametrically measuring the desirability of open educational resources using D-index.The International Review of Research in open and Distributed Learning, 13(2), 59-76.Retreaved from http://www.irrodl.org/index.php/irrodl/article/view/1177/2142
Adamov, E.O.,Dzhalavyan, A.V., Lopatkin, A.V., Molokanov,N.A., Muravyov,E.V., Orlov, V.V., &Ivanon, V.B. (2012).Conceptual framework of a strategy for development ofnuclear power in Russia to 2100.Atomic Energy, 112(6), 391-403.Retrieved from https://link.springer.com/ article/10.1007/s10512-012-9574-x
Adhiambo, A. A., &Memba, M. S. (2012). Credit Cards and Performance of Commercial Banks Portfolio in Kenya.International Journal of Arts and Commerce,1(6): 167–173.Retrieved from https://www.ijac.org.uk/images/ frontImages/gallery/ Vol.1_No.6 /18.pdf
Alshatti, A. S. (2015). The effect of credit risk management on financial Performance of the Jordanian commercial banks. Investment Management and Financial Innovations, 12(1), 338-345.
Ariffin, N. M. (2012). Liquidity risk management and financial performance. Aceh International Journal of Social Sciences, 1(2): 68–75.
Barton, T. L., Shenkir, W. G., & Walker, P. L. (2002). Making Enterprise Risk Management
Pay Off: How Leading Companies Implement Risk Management, Financial Upper Saddle
Times/Prentice Hall,River, NJ.
CPA ustralia (2010). Guide to Managing Liquidity Risk, ISBN 978-1-921742-00-2. Retrieve from https://www.bing.com/search?q=Guide+to+managing+liquidity+Risk+cpa+ Australia+ISBN+978-1-921742-00-2+&qs=n&form=QBRE&sp=1&pq=guide+to+managing+ liquidity +risk+&sc=0-33&sk=&cvid=69BC701E66FF4DFD94E8F121A4C3ED99 on 10th September 2021.
Dejin, L. (2020). The impact of Liquidity management on profitability in Chinese Big Four state owned Commercial Banks. Retrieved from The impact of liquidity management on profitability in Chinese Big Four State-Owned commercial banks | WIRE - Wenzhou-Kean University Intellectual Research Environment (wku.edu.cn)
Dimitropoulos P and Koronios K. (2019): Cash holdings, corporate performance and viability of Greek SMEs Implications for stakeholders. The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/1450-2194.htm.
Djumahir A.D and Roni H. (2016): The Effect of Working Capital Management on Profitability of State-Owned Enterprise in Processing Industry Sector. Journal of Applied Management (JAM) Volume 16 Number 2, June 2018 Indexed in Google Scholar
Dzapasi F. D (2020) : The impact of Liquidity Management on Bank Financial Performance in a subdued economic environment: A case of the Zimbabwean Banking Industry. PM World Journal (ISSN: 2330-4480) The impact of Liquidity Management on Vol. IX, Issue I – January 2020 Bank Financial Performance www.pmworldjournal.com Featured Paper by Farai D. Dzapasi
Eleftheriadis, I. &Vyattas, V. (2018).Risk and performance in Public Sector.10. 1007/978-3-319-31816-5_3453-1
Eljelly, A. M., (2004). Liquidity-profitability tradeoff: an empirical investigation in an emerging market. International Journal of Commerce and Management, 14(2), 48-61.
Elloumi, F., & Gueyie, J. (2001). Liquidity and corporate governance: an empirical analysis. Corporate Governance. International Journal of Business in Society, 1(1), 15 - 13.
Elly, D.O. (2012).Executive compensation and Firm Financial performance. A critical Literature Review. Retrieved from http://hdl.handle.net/11295/39259
Enya, E.F. and Effong, D.A. (2020). Liquidity Risk management and Financial Performance :Are consumer Goods campanies involved? International Journal of Recent Technology and Engineering (IJRTE) ISSN: 2277-3878, Volume-9 Issue-1, May 2020
Epstein, M. J., Buhovac, A. R., & Yuthas, K. (2015). Managing social, environmental and financial performance simultaneously. Long Range Planning, 48(1), 35-45.
Fabozzi, F.J., Gupta,F. & Markowitz, H.M. (2003). The legacy of Modern portfolio theory.Journal of investing.Vol.11 (3) 7 – 22. https://doi.org/10.2469/dig.v33.n2.1273
FJellman, S.M. (1976). Natural and unnatural Decision making.A critique of decision theory. Retrieved from onlinelibrary.wiley.com/doi/10.1525/eth.1976.4.1.02a00040/pdf
Francis A. (2017): Financial Management. Retrieved from Financial Management Archives - Page 3 of 49 - MBA Knowledge Base (mbaknol.com)
Franklin, A. (2018). Corruption and Contracts with States or State Owned Enterprises: Effects on Enforcement of the Contract in Arbitration Decisions.
Gitundu, E. W., Kisaka, S. E., Kiprop, S. K., & Kibet, L. K. (2016). The Effects of Ownership and Corporate Governance Reforms on Efficiency of Privatized Companies in Kenya. International Journal of Economics and Financial Issues, 6(1), 323-331.
Gossy, G. (2008). A Stakeholder Rationale for Risk Management: Implications for Corporate Finance Decisions.Retrieved from https://books.google.co.ke/ books/about/A _Stakeholder_ Rationale _for_Risk_Managem.html?id=dsxsHS9cJMQC&redir_esc=y
Haczynski, T. (2015). Asset and Management. Banking Book-Risk. Global Association for Risk Professionals. Rtrieved from RMA / Wharton Executive Education Program Liquidity Risk Philadelphia, PA (garp.org)
Kenya Business Guide (2019). Privatize or Die? Restructuring state owned Enterprises for Economic growth. Retrieved from ‘Privatize or Die?’ Restructuring State-Owned Enterprises for Economic Growth – Kenya Business Guide on 5th September 2021.
Halling, M., & Hayden, E. (2006). Institution failure prediction: a two-step Survival time approach, C.R.E.D.I.T. Conference. Austrian National institution Vienna, 101 - 109
Hamza K. and Mutala Z. (2015): Cash Management Practices and Financial Performance of Small and Medium Enterprises (SMES) in the Northern region of Ghana. International Journal of Economics, Commerce and Management United Kingdom Vol. III, Issue 7, July 2015 Licensed under Creative Common Page 456 http://ijecm.co.uk/ ISSN 2348 0386
Hansson, S.O.(1994).Decision theory.A brief introduction.Retrieved from http://www2. cs.siu.edu/~hexmoor/classes/CS539-F10/DT.pdf
Hansson, S.O (2005).Decision theory. A brief introduction .Royal institute technology; Stockholm. Retrieved from https://www.researchgate.net/publication/210642121 _Decision_Theory_A_Brief_Introduction
Heath, J. (2009).The uses and abuses of Agency Theory. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.336.2417&rep=rep1&type=pdf
IFCM.(n.d). Limitations of Modern Portfolio Theory.Retrieved July 20, 2021 from / https://www.ifcm.capital/modern-portfolio-theory/limitations-of-modern-portfolio-theory-mpt
Jeanne, O., & Svensson, L. O. (2007). Credible commitment to optimal escape from a liquidity trap: the role of the balance sheet. The American Economic Review, 97(1), 474-490.
Kaplan, R.S. & Mikes, A. (2012).Managing Risks;A new framework. Retrieved from https://hbr.org/2012/06/managing-risks-a-new-framework
Kennon, J. (2017, November 6) Return on Equity and income statement analysis. Retrieved from https://www.thebalance.com/return-on-equity-roe-357601
Khrawish, H.A (2011).Determinants of Commercial Bank performance .Evidence from Jordan. International Research Journal of Finance and Economies.Zarga University 5(5) 19 – 4
Krause, T.A, Tse, Y. (2016). Risk Management and firm value: Recent theory and Evidence. International Journal of Accounting and information management, 24(1); 56 - 81.www.emeraldinsight.com/1834-7649.htm
Laryea H. and Pimpong S. (2016) BUDGETING AND ITS IMPACT ON FINANCIAL PERFORMANCE: THE CASE OF NON-BANK FINANCIAL INSTITUTIONS IN GHANA. International Journal of Academic Research and Reflection Vol. 4, No. 5, 2016 ISSN 2309-0405
Madugba J.U and Ogbonnaya A.K (2016): working capital management and Financial performance: Evidence from manufacturing companies in Nigeria. European Journal of Accounting, Auditing and Finance Research Vol.4, No.9, pp.98-106, August 2016
Mandelbrot, B., & Hudson, R. L. (2004), The (Mis) Behaviour of Markets: A Fractal View of Risk, Ruin, and Reward, London: Profile Books.
Markowitz, H. (1952). Portfolio Selection, Journal of Finance 7 (1), 77–91. http://www.jstor.org/about/terms.html
Maness, T. S., & Zietlow, J. T. (2005). Short-term Financial Management. South Western/Thomson Learning, Ohio.
Mbo, M. (2017). Drivers of organizational performance: a state owned enterprise perspective (Doctoral dissertation, Stellenbosch: Stellenbosch University).
Mihyo, P. B., & Mukuna, T. E. (2018). Interface between Formal and Informal Systems of Horizontal Accountability in Kenya's State-Owned Enterprises. Eastern Africa Social Science Research Review, 34(2), 101-131.
Modigliani, F. & Miller, M.H. (1958). The Cost of Capital, Corporate Finance and the Theory of Investment, American Economic Survey, 48(3) 261-297.http://www.jstor.org/stable/ 1809766?origin=JSTOR-pdf
Mohamed A.I and Ali A.Y.S (2013) Relationship between budgeting and Performance of remittance Companies in Somalia.
Mozumdar, A. (2001). Corporate Hedging and Speculative Incentives: Implications for
Swap Market Default Risk. Journal of Financial and Quantitative Analysis, 36(2), 221-250.https://doi.org/10.2307/2676272
Mugenda, O.M., &Mugenda, A.G. (2012).Research methods dictionary.Retrieved from http://ir-library.ku.ac.ke/handle/123456789/8329
Muriithi,J.N., and Waweru, K.M.(2017). Liquidity Risk and Financial Performance Of Commercial Banks in Kenya, International Journal of Economics and Finance; Vol. 9, No. 3; 2017 ISSN 1916-971X E-ISSN 1916-9728 Published by Canadian Center of Science and Education. https://doi.org/10.5539/ijef.v9n3p256
Muriungi, C. N., Waithaka, M., Were, E., & Muriuki, M. (2017). Effects of risk Management on financial stability of state corporations in Kenya: A survey of Tourism Fund (TF) and Kenyatta International Convention Centre (KICC). International Academic Journal of Economics and Finance, 2(3), 268-291
Oluoch J.O (2016): The Impact of Cash Management Practices on Performance of SMEs: A Survey of SMEs in Eldoret Central Business District. IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 7, Issue 6 Ver. III (Nov. - Dec. 2016), PP 01-07 www.iosrjournals.org
Olsson, R. (2008). Risk Management in a Multi-Project Environment: An Approach to Manage Portfolio Risks.International Journal of Quality & Reliability Management, 25 (1), 60–71. https://doi.org/10.1108/02656710810843586
Omasate, C.A. (2014).The effect of Risk Management on Financial performance of Insurance Companies in Kenya. Retrieved from http://hdl.handle.net/11295/74732
Osoro , E.M. and Muturi, w.(2015). Effects of Liquidity Risk Management practices on Financial performance of Savings and Credit Cooperative societies in Kisii County. International Academic Journal of Information Sciences and Project Management | Volume 1, Issue 4, pp. 68-85. Available Online at: http://www.iajournals.org/articles/iajispm_v1_i4_68_85.pdf
Peavler, R.(2018, May 20).The return on investment Ratio explained. Retrieved from https://www.thebalance.com/return-on-investment-ratio-393206
Pennings, J.M. &Smidts, A.(2000).Assessing the construct validity of risk attitude. Management Science,46(10),1337 – 1348.Retrieved from https://pubsonline.informs. org/doi/pdf/10. 1287/mnsc.46.10.1337.12275
Podilchuk, Z. (2013). Impact of Liquidity Management on Profitability: Evidence from Ukraine. (MA), Ukraine.
Regoniel, P.A. (2015). Conceptual Framework.A step by step guide on How to make one. Retrieved from http:simplyeducate.me/2015/01/05/Conceptual-framework-guide
Richards, V. & Laughlin, E. (1980). A Cash Conversion Cycle Approach to Liquidity Analysis, Financial Management, 9(1), 32-38, ISSN 0046-3892
Samiloglu, F., & Demirgunes, K. (2008). The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey. The International Journal of Applied Economics and Finance, 2, 44-50.
Shaheer, N., Yi, J., Li, S., & Chen, L. (2017). State-Owned Enterprises as Bribe Payers: The Role of Institutional Environment. Journal of Business Ethics, 1-18.The National Treasury and planning (2021): Update on reforms of state
Corporations. Republic of Kenya; press statement. Retrieved from Press-Statement-8th-July-2021-Update-on-Reforms-of-State-Corporations.pdf (treasury.go.ke)
The National Treasury (2018). State-owned corporations. Retrieved from http://treasury.go.ke/27- about-us/168-state-corporations
Terseer,W.,Henry, Y., and Mkuma, Y.P.(2020). Effect of Liquidity management on the Financial Performance of Banks in Nigeria. European Journal of Business and Innovation Research Vol.8, No.4.pp. 30-44, July 2020 Published by ECRTD-UK Print ISSN: 2053-4019(Print), Online ISSN: 2053-4027(Online)
Van Dooren, W., & Van de Walle, S. (Eds.). (2016). Performance information in the public sector: How it is used. Springer.
Verma, E.(2021). Financial performance: Understanding the Concept and its Areas. Retrieved from Financial Performance: Understanding The Concepts And Its Areas (simplilearn.com) on 22nd September 2021.
Wani, A.A and Dar, S.A. (2015). Relationship between Financial Risk and Financial performance: An insight of Indian insurance industry, nternational Journal of Science and Research (IJSR) ISSN (Online): 2319-7064 Index Copernicus Value (2013): 6.14 | Impact Factor (2014): 5.611. http://www.ijsr.net/
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Dr.Ambrose Jagongo, Emmy Chelangat Rop
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.
