RELATIONSHIP BETWEEN WORKING CAPITAL MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE BY REGISTERED PROPERTY DEVELOPERS IN KENYA

Abstract

Purpose: Working capital management is acknowledged as a very significant element in examining performance of firms. In property development sector, large developers dominate the market but there still exist a huge housing hollow. Property development firm faces challenges in areas of working capital management that limits them in fulfilling the housing needs of citizens and further exposes the firms to poor financial performances. The current study sought to establish the relationship between working capital management practices and financial performance by registered property developers in Kenya. Specifically, the study sought to investigate the relationship between debtors’ management practices, inventory management practices, cash management practices and creditors’ management practices and financial performance by registered property developers in Kenya. Methodology: The study was anchored on Agency Theory, The Theory of Working Capital Management, The Trade- off Theory and The Pecking Order Theory. The population of the research was seventy-six registered property developers in Kenya. The unit of observation comprised of finance managers. A census approach was employed in the study. The study utilized both primary and secondary data where structured questionnaires were used to gather primary data while a secondary data collection was used in gathering secondary data from the respective firm’s financial reports. Both inferential and descriptive statistics were employed in analyzing the collected data and results presented in form of tables and figures. Findings: The results of the analysis revealed that Cash Management Practices, Debtors’ Management Practices, Creditors’ Management Practices and Inventory Management Practices positively and significantly relates with financial performances of registered property developers in Kenya. The study concluded that Cash Management Practices, Debtors’ Management Practices, Creditors’ Management Practices and Inventory Management Practices positively and significantly relates with financial performances of the property developers. Unique contribution to theory, policy and practice: The study recommends the management of registered property developers in Kenya to enhance their practices in Cash Management, Debtors’ Management, Creditors’ Management and Inventory Management since the practices positively and significantly relates with financial performance of the property developers.