Effect of Default on Profitability in Kenyan Listed Companies

James Ndegwa
Additional contact information
James Ndegwa: School of Business and Economics, Cooperative University of Kenya

International Journal of Finance & Banking Studies, 2020, vol. 9, issue 4, 01-10

Abstract: Past studies in Kenya on default have concentrated on liquidity as a measure of short term default and neglected solvency which measures long term default. The current study examined the association between solvency and liquidity and their effect on profitability in Kenyan listed companies. A total of 41 firms were selected to be in the study sample out of 46 non-financial listed firms in the Nairobi Securities Exchange during years 2013 to 2017 and panel data regression analysis was employed hence 205 firmyears were analyzed. The findings revealed that liquidity and solvency are significantly and negatively associated while the default measures lacked a significant relationship with profitability in Kenyan listed companies. The findings implied that there is no need for firms to focus too much on the relationship between default and profitability including invest heavily in liquidity in order to meet short term obligations as nowadays it is possible for firms to either convert non-cash assets quickly or borrow on short notice from financial institutions in case of an urgent need to meet liquidity shortages. These findings are consistent with the shitability theory.

Keywords: Solvency; Liquidity; Firm size; Profitability (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/876/676 (application/pdf)
https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/876 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rbs:ijfbss:v:9:y:2020:i:4:p:01-10

Access Statistics for this article

International Journal of Finance & Banking Studies is currently edited by Prof.Dr.Hasan Dincer

More articles in International Journal of Finance & Banking Studies from Center for the Strategic Studies in Business and Finance IJFBS Editorial Office, IMU, School of Business. Contact information at EDIRC.
Bibliographic data for series maintained by Hasan Dincer ().