EFFECT OF ACCOUNT PAYABLE MANAGEMENT ON FINANCIAL PERFORMANCE OF PUBLIC UNIVERSITIES IN KENYA

Abstract

The financial performance of Kenyan universities has been declining to recent time where most of the universities reported deficits in their income statement, following the dwindling revenues universities are in a deep financial crisis that can possibly lead some of them to a halt. Auditor General declared 11 universities insolvent in a report to Parliament for financial year (2017/2018). Proper Accounts receivable management is essential for any organizational survival. This is because an institutions’ inability to identify relevant accounts receivable management practices can be its source of inability to perform. The general objective of this study was to determine the Effect of Accounts payable management on financial performance of public universities in Kenya, which was guided by the following independent variables; effect of account payable turnover management on financial performance of public universities in Kenya, effect of account payable day ratio management on financial performance of public universities in Kenya, effect of coverage  ratio management on financial performance of public universities in Kenya. The study was anchored on trade off theory, operating cycle theory, liquidity theory. The scope of the study was based on public universities in Kenya for period between years 2016 to 2019. Existing literature was reviewed in details in chapter two of the study. Quantitative research design was used in this study. The study population was 31 accredited public universities in Kenya. Secondary data was collected from the auditor general’s office. The study found that accounts payable turnover management, accounts payable day ratio management, coverage ratio management as measures of accounts payable collective and individually affects financial performance of public universities in Kenya. The study revealed that student enrolment moderates the relationship between accounts payable management and financial performance of public universities in Kenya. Coefficient of determination R2 = 0.563 shows that 53.6 percent of the variation in financial performance are accounted for by the changes in accounts payable management of public universities in Kenya. The study concluded that accounts payable management plays a significant role in financial performance of public universities in Kenya.  The study therefore recommended that all public universities embrace accounts payable management in order to have sound financial performance. Further it is recommended that more research can be done on private universities in Kenya to facilitate generalization.