Determinants of Financial Distress among Selected Firms Listed At Nairobi Securities Exchange: Case of Kenya Airways and Uchumi Supermarkets from 2013 To 2017

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dc.contributor.author Mbai, Vincent Mbiti
dc.date.accessioned 2018-11-08T07:30:42Z
dc.date.available 2018-11-08T07:30:42Z
dc.date.issued 2018
dc.identifier.uri http://erepo.usiu.ac.ke/11732/4085
dc.description A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA) en_US
dc.description.abstract The purpose of the study at hand was to establish determinants of financial distress among selected firms listed at Nairobi Securities Exchange: case of Kenya Airways and Uchumi Supermarkets. In order to achieve this, the study was guided by the following three research questions: What is the relationship between financial leverage and financial distress at Kenya Airways and Uchumi Supermarkets? What is the relationship between liquidity and financial distress at Kenya Airways and Uchumi Supermarkets? What is the relationship between profitability and financial distress at Kenya Airways and Uchumi Supermarkets? The study utilized descriptive research method. The descriptive research design was applicable to the current study because it enabled an investigation in which quantity data was collected and analyzed in order to describe the specific phenomenon in its current trends, current events and linkages between different factors at the current time. It also helped in describing the state of affairs of the problem under investigation and the relationship between the variables. The target population of this study involved all the two financially distressed companies listed at NSE in Kenya. These included: Kenya Airways and Uchumi Supermarkets. The study covered a five-year period, 2013 to 2017. The study used secondary data. The secondary data involved use of quantitative data. The secondary data was extracted from annual financial reports of the two listed commercial and services firms in Kenya for the period of five years from 2013 to 2017. The financial reports were obtained from the Nairobi Securities Exchange, firms’ publications and websites. The study used software known as Statistical Package for Social Sciences (SPSS version 21) for data analysis process. Descriptive data analysis techniques were used to analyze the data. This involved descriptive tools such as means, maximum, minimum and standard deviation. The study also involved running the regression model. The study also tested the significance of the relationship between variables in the model by use of correlation analysis. The first research question established that financial leverage was positively related to financial distress as such a unit increase in leverage could minimize financial distress. The second research question found that liquidity was correlated to financial distress thus a unit increase in the liquidity leads to a reduction in the financial distress at Kenya Airways and Uchumi. The third research question revealed that profitability has positive relationship with financial distress; therefore, the firms used profitability to minimize financial distress. The study concluded that financial leverage, liquidity and profitability have significant positive relationship with financial distress as measured by Altman Z score. This conclusion was supported by regression coefficient results that concluded that a unit increase in leverage, liquidity and profitability leads to a reduction of financial distress as measured by Altman Z scores of the studied firms. Based on the findings, the study, therefore, recommends that non-financial firms should endeavor to employ more equity and less debt capital to finance their operations. The study recommends that where non-financial firms must consider using debt in their capital structure, non-current debt should be prioritized ahead of short term debt. The study finally recommends that in configuring their profitability structure, financing managers of nonfinancial firms should prioritize the use of internally generated capital such as retained earnings and reserves ahead of externally issued equity and assets. The study recommends that research be carried out to test financial distress prediction models to non- listed firms, relatively smaller turnover sized firms where the incidences of business failure is greater than larger corporations. This will help determine financial position of all firms in the economy and give more insights to investors on their investment decisions. With this suggestion regulatory bodies like Nairobi Securities Exchange and Capital Market Authority will be able to capture wider market in terms of listing new firms rather than using listed firms as a basis for testing financial distress. en_US
dc.language.iso en en_US
dc.publisher United States International University - Africa en_US
dc.subject Determinants en_US
dc.subject Financial Distress en_US
dc.subject Selected Firms en_US
dc.subject Nairobi Securities Exchange en_US
dc.subject Kenya Airways en_US
dc.subject Uchumi Supermarkets en_US
dc.subject 2013 To 2017 en_US
dc.title Determinants of Financial Distress among Selected Firms Listed At Nairobi Securities Exchange: Case of Kenya Airways and Uchumi Supermarkets from 2013 To 2017 en_US
dc.type Thesis en_US

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