Liquidity Optimization, Asset Tangibility and Financial Stability of Non-Financial Firms Listed at the Nairobi Securities Exchange, Kenya (African Development Finance Journal)

Summary

• The study targeted 38 non-financial firms listed at the NSE and analysed 30 with complete data for the five-year period 2021-2025.p.2
• The Pearson correlation between liquidity optimization and financial stability is 0.553 with a p-value of 0.002.p.10
• Liquidity optimization explains 30.5% of the variation in financial stability (R-squared of 0.305).p.11
• The regression equation is Financial Stability = 12.862 + 22.694 Liquidity Optimization.p.12
• Adding the interaction with asset tangibility raised R² to 0.455 from 0.416, but the increase was not statistically significant (p = 0.182).p.13
• Average liquidity optimization was 0.0457, indicating that net working capital was only a small proportion of total assets.p.9

Key insights

1. Listed non-financial firms faced declining operating cash flows, cash ratios and profitability between 2016 and 2024.p.2
2. The regression model is significant (F = 12.306, p-value = 0.002), so liquidity optimization improves the explanation of financial stability.p.11
3. At least one firm had a liquidity optimization value of −0.5694, a short-term funding deficit.p.9
4. Asset tangibility has a positive and significant relationship with financial stability (coefficient 21.865, p = 0.034).p.14
5. Asset tangibility does not moderate the effect of liquidity optimization on financial stability, as the interaction term is insignificant.p.16
6. Strategies to strengthen liquidity optimization should target firms regardless of their level of asset tangibility.p.17