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Research Paper | Management | Kenya | Volume 3 Issue 11, November 2014 | Popularity: 6.7 / 10

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Effect of Financing Decisions on Liquidity of Listed Commercial Banks in Kenya

Dorcas Wambui N., Willy Muturi

Abstract: Corporate financing decisions are a concern of major significant interest in the corporate circle since maintaining high liquidity position helps the firm to meet due obligations and ensure smooth operational business flow while leveraging their debt structure choice. The purpose of this study was to assess the effect of equity financing decisions on the liquidity of listed commercial banks in Kenya. This study adopted a Causal-Comparative descriptive design. Data was collected from secondary sources mainly Nairobi Securities Exchange (NSE). The data collected was coded, classified and analyzed using statistical package for social sciences (SPSS). The findings of the study showed a weak positive relationship between equity financing and liquidity of listed commercial banks in Kenya this meant that equity financing though riskier of all the financing options, had small effects on liquidity as equity was not readily convertible to cash on demand and was also subject to the vagaries of the financial market. The study recommends that there was need for the banks to seek more equity funding probably as a first option to mitigate the financing risks. Lastly, banks should build cash reserves through alternative investments to enable them to internally source finance through their assets in expensiveness way.

Keywords: Equity Finance, Financing, Liquidity, Commercial banks

Edition: Volume 3 Issue 11, November 2014

Pages: 205 - 208

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