Accounts Receivables and Financial Performance of Listed firms at Nairobi Securities Exchange, Kenya.

Abstract

This study empirically investigated the effect of accounts receivable management on the financial performance of firms listed at the Nairobi Securities Exchange (NSE), Kenya. The study was motivated by the growing concern that ineffective management of accounts receivable exposes firms to liquidity challenges, bad debts, and reduced profitability despite receivables being a key source of operational financing. Guided by Agency Theory, Free Cash Flow Theory, and the Cash Conversion Cycle Theory, the study adopted a positivist research philosophy and employed descriptive and correlational research designs. The study utilized secondary panel data obtained from annual reports of listed firms over a specified period and applied panel regression analysis to examine the relationship between accounts receivable management and financial performance. Financial performance was proxied using Return on Assets (ROA), while accounts receivable management was measured using accounts receivable ratios that capture the efficiency of credit management and debt collection practices. The descriptive statistics revealed that Accounts Receivable Management (ARM) recorded an average value of 0.1239 with a standard deviation of 0.1183, indicating moderate variation in receivables management practices among the sampled firms. The observed minimum and maximum values of –0.2544 and 0.9820 further demonstrated substantial differences in the efficiency of customer credit and debt collection policies among listed firms. Correlation analysis showed that ARM had a strong positive and statistically significant relationship with financial performance (r = 0.723, p < 0.01), implying that firms that effectively managed and recovered trade receivables were more likely to achieve superior profitability. The regression results further established that accounts receivable management has a positive and statistically significant effect on the financial performance of listed firms at the Nairobi Securities Exchange, Kenya. The findings suggest that efficient receivables management accelerates cash inflows, reduces the incidence of bad debts, improves liquidity, and enhances firms' ability to meet short-term obligations, thereby increasing profitability. The study concludes that prudent accounts receivable management is a critical determinant of firm financial performance and recommends that listed firms strengthen their credit policies, enhance debt collection mechanisms, and continuously monitor receivables to improve liquidity and maximize shareholder value.

Key Words: Accounts receivable management, financial performance, return on assets, liquidity, listed firms, Nairobi Securities Exchange, credit policy, debt collection, panel regression analysis, Kenya.

DOI: 10.7176/RJFA/17-3-05

Publication date: July 30^th 2026