Financial Management Practices and Financial Performance of Commercial and Manufacturing State Corporations in Kenya
DOI:
https://doi.org/10.47604/ijfa.3690Keywords:
Liquidity Management, Financial Risk Management, Capital Structure Management, Working Capital Management, Internal Cashflows, Firm Size, Financial PerformanceAbstract
Purpose: This independent study in finance attempts to investigate effect of Financial Management Practices on Financial Performance of Commercial and Manufacturing State Corporations in Kenya.
Methodology: Researcher intends to adopt a positivist philosophy that demands researcher to be independent of the study. Explanatory non-experimental research design will be employed in the study. For the purposes of this study, a census of all Commercial and Manufacturing Corporations will be used in study. The study will use Secondary data from financial statements of Commercial and Manufacturing State Corporations for period 2020-2025. Data will be obtained from office of auditor general and Kenya Parliament Library. Researcher proposes to use a panel multiple linear regression model in the analysis and Baron & Kenny (1986) methodology to test for mediation and moderation effects.
Findings: The study anticipates that effective financial management practices will significantly enhance Financial performance with internal cashflows mediating this effect, particularly moderated by firm size in Commercial and Manufacturing State Corporations in Kenya. The study will determine whether the financial management practices significantly affect Financial Performance of Commercial and Manufacturing State Corporations In Kenya and give advise to Management and those charged with governance of these corporations on management practices of serious concerns for improvement. Findings will guide management to prioritize risk management practices, advising governance bodies on reforms to improve financial health and reduce bailout dependencies.
Unique Contribution to Theory, Practice and Policy: Management of Commercial and Manufacturing State Corporations will be able to tell how financial management practices affect their financial performance. The study intends to ennriches literature by testing mediation and moderation in an African SOEs context, potentially refining Resource based Theory for resource-constrained environments. The study informs turnaround strategies for Kenyan SOEs, such as optimizing capital structure to boost performance amid economic volatility. Finally, the study will provide evidence for policymakers (e.g., Treasury) to enforce better financial practices, supporting sustainable development goals.
Downloads
References
Addin Al-Mawsheki (2022). Effect of working capital policies on firms’ financial performance. Cogent Economics & Finance, 10(1), 2087289.
Adebayo & Ackers (2022). Insights on corporate governance practices of state-owned enterprises (SOEs). Journal of Accounting and Investment, 23(1), 170-195.
Adediran, Abdullahi, Oladipo & Puke (2025). Risk Management Strategies and Financial Performance of Quoted Deposit Money Banks in Nigeria. Management, 4(1).
African Development Bank. (2022). African economic outlook.
Ajibola, Wisdom & Qudus (2018). Capital structure and financial performance of listed manufacturing firms in Nigeria. Journal of Research in International Business and Management, 5(1), 81-89.
Akgun & Memis (2020). "Investigating the relationship between working capital management and business performance: evidence from the 2008 financial crisis of EU-28," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 17(4)
Al-Ababneh (2020). Linking ontology, epistemology and research methodology. Science & Philosophy, 8(1), 75-91.
Ali (2024). A guide for positivist research paradigm: From philosophy to methodology. Ideology Journal, 9(2).
Amponsah & Asiamah (2021). Working capital management and profitability of listed manufacturing firms in Ghana. International journal of productivity and performance management, 70(7), 1751-1771.
Arifaj, Berisha, Morina & Avdyli (2023). Exploring the impact of cash flow, company size, and debt on financial performance in corporations. Investment Management & Financial Innovations, 20(3), 264.
Arin, Nyahas & Ekoja (2024). Basel III liquidity requirements and bank profitability: evidence from Nigeria. international journal of business economics and management science.
Asiedu (2020). Acquisition and management of non-current assets: A case study of Ghana shippers’ authority.
Avila (2022). Competitive advantage and knowledge absorptive capacity: The mediating role of innovative capability. Journal of the Knowledge Economy, 13(1), 185-210.
Barnabas & Oloyede (2024). Cash Flow Optimization: Strategies for Enhancing Short-Term Liquidity. Available at SSRN 5004465.
Barney, Ketchen & Wright (2021). Resource-based theory and the value creation framework. Journal of Management, 47(7), 1936-1955.
Bernier (2017). State-owned enterprises in the 21st century: Revisiting the role of the state in the business sector. Annals of Public and Cooperative Economics, 88(3), 481–499.
Bernier, Bance & Florio (2020). The Routledge handbook of state-owned enterprises (No. 305607). New York: Routledge.
Bognetti (2020). History of western state-owned enterprises: From the industrial revolution to the age of globalization. In The Routledge handbook of state-owned enterprises (pp. 25-44). Routledge.
Brealey, Myers & Allen (2020). Principles of corporate finance (13th ed.). McGraw-Hill Education. (OECD, 2020; World Bank, 2022).
Bruton, G. D., Peng, M. W., Ahlstrom, D., Stan, C. V., & Xu, K. (2015). State-owned enterprises around the world as hybrid organizations. Academy of Management Perspectives, 29(1), 92–114.
Chanua, J., et al. (2025). Financial management practices and firm performance in Kenyan state corporations.
Chun, Birks & Francis (2019). Grounded theory research: A design framework for novice researchers. SAGE open medicine, 7, 2050312118822927.
Cuervo-Cazurra, Inkpen, Musacchio & Ramaswamy (2014). Governments as owners: State-owned multinational companies. Journal of International Business Studies, 45(8), 919–942.
Dang, Nguyen & Taghizadeh (2021). State-owned enterprise reform in Viet Nam: Progress and challenges. Reforming State-Owned Enterprises in Asia: Challenges and Solutions, 231-254.
Fiebelkorn, Owuor & Nzioki (2021). Kenya state corporations review: Corporate governance and fiscal risks of state corporations.
Filatova, Kulyk & Kravchenko (2024). Optimization of a company’s capital structure based on the criterion of minimizing the level of financial risk. Accounting and Financial Control, 5(1), 46.
Fwamba (2018). Influence of financial management practice on financial performance of sugar manufacturing companies in Kenya (Doctoral dissertation, COHRED-JKUAT).
Giustiziero, Kretschmer, Somaya & Wu (2023). Hyper specialization and hyper scaling: A resource‐based theory of the digital firm. Strategic Management Journal, 44(6), 1391-1424.
Habineza & Cortez (2023). The effect of budget control on financial performance among state-owned enterprises:
He & Wei (2023). China's financial system and economy: A review. Annual Review of Economics, 15(1), 451-483.
İltaş & Demirgüneş (2020). Asset tangibility and financial performance: Time series evidence. Ahi Evran Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 6(2), 345-364.385-396.
Irene & Bunyasi (2017). Effects of Risk Assessment and Internal Audit Standards on Financial Performance of State-Owned Corporations in Kenya: A Case Study of the Ministry of Labour Social and Security Services. Journal of Finance and Accounting, 1(1), 1-13.
Ireri (2021). Appointment of Board of Directors to State Owned Enterprises in Kenya (Unpublished thesis). University of Nairobi.
Jermias, Fu & Chen (2023). Budgetary control and risk management institutionalization: a field study of three state-owned enterprises in China. Journal of Accounting & Organizational Change, 19(1), 63-88.
Kadima (2024). Working Capital Management, Firm Size and Stock Liquidity of Firms at Nairobi Securities Exchange, Kenya (Doctoral dissertation, JKUAT-COHRED).
Kaino, Kiragu, David & Mburu (2025). Effect of Financial Management Practices on Performance of Commercial State-owned Enterprises in Kenya: A Machine Learning Approach.
Kalelioğlu (2020). The contemporary critique of positivism: The issues of replicability and universality. Uğur Berk Kalelioğlu.
Kenya National Bureau of Statistics (KNBS, 2024). Economic Survey 2024. Nairobi: KNBS.
Khansa, L., Nugroho, W. S., & Nurcahyono, N. (2022). The Effect of Liquidity, Leverage, Profitability and Firm size on Performance.
Kinyua, Gakure, Gekara & Orwa (2015). Effect of risk management on the financial performance of companies quoted In the Nairobi Securities Exchange. International Journal of Business & Law Research, 3(4), 26-42.
Kirongo & Odoyo (2020). Research philosophy design and methodologies: A systematic review of research paradigms in information technology.
Kozlowski (2021). Long-term finance and investment with frictional asset markets. American Economic Journal: Macroeconomics, 13(4), 411-448.
Kruhlov (2024). Formulating state policy to support state corporations in strategic economic sectors. Development Management, 4(23), 55-63.
Kuo, Fang & LePage (2022). Proactive environmental strategies in the hotel industry: Eco-innovation, green competitive advantage, and green core competence. Journal of Sustainable Tourism, 30(6), 1240-1261.
Laghari, Ahmed & López García (2023). Cash flow management and its effect on firm performance: Empirical evidence on non-financial firms of China. Plos one, 18(6), e0287135.
Lee, Ahmad, Lee, Khalid & Karim (2022). The financial sustainability of state-owned enterprises in an emerging economy. Economies, 10(10), 233.
Lutfi, Al-Okaily, Alsyouf, Alsaad & Taamneh, A. (2025). The impact of AIS usage on AIS effectiveness among Jordanian SMEs: A multi-group analysis of the role of firm size. Global Business Review, 26(2), 538-556.
Maina & Kihara (2025). Strategic leadership practices and performance of regulatory state corporations in Nairobi County, Kenya. International Journal of Innovation, Enterprise, and Social Sciences, 5(1), 428-445.
Maretha (2023). Positivism in philosophical studies. Journal of Innovation in Teaching and Instructional Media, 3(3), 124-138.
Margie & Habibah (2025). Impact of Operating Cash Flow and ROA on Stock Returns in LQ 45 Companies in Period 2018-2023. Golden Ratio of Finance Management, 5(2), 435-444.
Marimuthu (2020). Government assistance to state-owned enterprises: a hindrance to financial performance. Investment Management & Financial Innovations, 17(2), 40.
Mohuba (2023). The Effects of Risk Management on State-Owned Enterprises’ Market Value: A Conceptual Analysis. Journal of Public Administration and Development Alternatives (JPADA), 8(3), 51-63.
Mootian & Mukoma (2020). Firm specific factors and financial performance of real estate firms listed at the Nairobi securities exchange in Kenya. Research Journal of Finance and Accounting, 11(14), 164-178.
Morrison, Adu & Guo (2024). Executive compensation, sustainable business practices and firm performance: a systematic literature review and future research agenda. Journal of Accounting Literature.
Mwangi (2024). Financial Management Practices and Financial Performance of Commercial State Corporations in Kenya (doctoral dissertation, Kenyatta university).
Nassar (2016). The impact of capital structure on Financial Performance of the firms: Evidence from Borsa Istanbul. Journal of Business & Financial Affairs, 5(2), 1-4.
Ndruru (2025). The role of liquidity management in enhancing corporate financial stability: a systematic literature review on cash reserves and marketable securities strategies. PRODUCTIVITY: Journal of Integrated Business, Management, and Accounting Research, 2(1), 09-17.
Nidumolu (2018). Exploring the effects of agency theory on ownership structures and firm performance. Working paper.
Njue (2020). Liquidity management and financial performance of microfinance institutions in Kenya (Doctoral dissertation, University of Embu).
Obonyo & Opuodho (2025). Financial leverage and firm performance in Kenyan manufacturing firms.
OECD (2020). OECD guidelines on corporate governance of state-owned enterprises. OECD Publishing. (OECD, 2020; World Bank, 2022).
Olufemi (2025). Effect of Free Cash Flow and Inventory Turnover on Performance of Listed Manufacturing Firms in Nigeria: The Moderating Role of Leverage. FUDMA Journal of Accounting and Finance Research [FUJAFR], 3(2), 168-186.
Omoruyi, Yusuff, Ilias, Oke, Bot & Oladele (2025). Cash Management and Its Impact on Manufacturing Industry Profitability: a Case Study of PZ Industries Plc. Path of Science, 11(5), 1015-1022.
Organisation for Economic Co-operation and Development (OECD, 2023). State-owned enterprise governance outlook.
Panda & Leepsa (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian journal of corporate governance, 10(1), 74-95.
Panigrahi (2022). Chapter-17 working capital management: Strategies for efficiency. Financial Management Excellence: Strategies for Sustainable Growth, 226.
Park (2021). Enhancing the transparency and accountability of state-owned enterprises. In Reforming State-Owned Enterprises in Asia: Challenges and Solutions (pp. 21-39). Singapore: Springer Singapore.
Park, Konge & Artino (2020). The positivism paradigm of research. Academic medicine, 95(5), 690-694.
Peng (2021). Effect of Working Capital on Financial Distress among Manufacturing Firms Listed at the Nairobi Securities Exchange (Doctoral dissertation, University of Nairobi).
Peng, M. W., Bruton, G. D., Stan, C. V., & Huang, Y. (2016). Theories of the (state-owned) firm. Asia Pacific Journal of Management, 33(2), 293–317.
Permana (2023). Analysis of the Financial Performance of State-Owned Enterprises (SOEs) in the Mining Sector Listed on the Indonesia Stock Exchange in 2018-2022. Indo-Fintech Intellectuals: Journal of Economics and Business, 3(2), 371-383, review. Communications of the Association for Information Systems, 37.
Rijal (2022). Relation between Liquidity and Profitability of Nabil Bank and Everest Bank Limited. Journal of Kathmandu Bernhardt College, 17-27.
Rop & Jagongo (2021). Liquidity risk management and financial performance of state-owned enterprises in Kenya. International Journal of Finance and Accounting, 6(2), 11-28.
Singh & Chen (2020). State-owned enterprises and the political economy of state–state relations in the developing world. In Developmental States beyond East Asia (pp. 45-65). Routledge.
Sundas & Butt (2021). Impact of liquidity on profitability and Performance: A Case of Textile Sector of Pakistan. International Journal of Commerce and Finance, 7(1), 122-129.
Suu, Tien & Wong (2021). The impact of capital structure and ownership on the performance of state enterprises after equitization: Evidence from Vietnam. Annals of Financial Economics, 16(02), 2150007.
Tuan, Nha & Phuong (2019). Impact of agency costs on firm performance: Evidence from Vietnam. Organizations and Markets in Emerging Economies, 10(2), 294–309. https://doi.org/10.15388/ omee.2019.10.15
World Bank. (2022). State-owned enterprises: Global trends and reforms. The World Bank Group.
World Bank. (2023). Public enterprise performance and reform outlook. The World Bank Group.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Peter Njoroge, Dr. Ambrose Jagongo (PhD)
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.
