Effect Of Covid-19 Measures On Working Capital Management Of Nse-Listed Manufacturing Companies In Kenya

Abstract

This study examined the impact of COVID-19 measures on the working capital management (WCM) of manufacturing companies listed on the Nairobi Securities Exchange (NSE) in Kenya. Adopting a longitudinal research design, the study was grounded in the cash conversion cycle theory, risk-return trade-off theory, agency

theory, and liquidity preference theory. The target population comprised all eight NSE- listed manufacturing firms from 2017 to 2022. Secondary data were obtained from

financial reports and the Kenya National Bureau of Statistics. Panel regression analysis was used to assess the impact of lockdowns (measured by period variations), fiscal policies (proxied by government spending), and monetary policies (represented by interest rates) on WCM. The findings indicate that company-specific factors predominantly influenced the Average Collection Period (ACP), with no significant impact from macroeconomic variables or the COVID-19 lockdown period (p > 0.05). However, the Average Payment Period (APP) and Inventory Conversion Period (ICP) exhibited statistically significant variations over time, with interaction effects between Company ID and period (p < 0.05), indicating that lockdown measures had an impact on these components. Similarly, the Quick Ratio (QR) was significantly influenced by

inflation (p = 0.023) and company differences, with a marginally significant period- company interaction (p = 0.052), implying a possible impact of the COVID-19

lockdown. Conversely, the Cash Conversion Cycle (CCC) was primarily driven by GDP (p = 0.024) and company-specific factors, with no significant effect from the COVID-19 lockdown period or fiscal and monetary policies. The analysis of government spending on WCM revealed no significant relationship (p > 0.05), suggesting that fiscal interventions, including supplementary budgets and tax incentives, had a limited effect on the liquidity and operational efficiency of NSE-listed manufacturing firms. Similarly, monetary policies implemented by the Government of Kenya and the Central Bank of Kenya did not significantly influence WCM, highlighting the inadequacy of these interventions in mitigating economic shocks. The findings further suggest that while government spending on social protection primarily targeted households, it did not provide sufficient support for manufacturing firms. The study recommends that corporations establish contingency funds to navigate future economic crises and that the government implement more responsive fiscal and monetary policies, including targeted financial support for businesses. Further research is needed to evaluate the effectiveness of broader fiscal and monetary interventions and assess post-pandemic government preparedness in stabilizing the manufacturing sector.