Liquidity Risk Management and Financial Performance of Water Service Providers in Bungoma County, Kenya

Wafula Alice, Dr. Brian singoro, Dr. Rashid Fwamba

water service, Bungoma County

Despite the commercialization of all public water service providers in Kenya by the water Act 2002, the firms are still struggling in their management of their liquidity. Even with the high demand for water services as well as sewerage systems, the water service providers in Kenya are still experiencing challenges of liquidity risk as majority of them are not able to cover their operation costs.The aim of this study was to investigate the effect of liquidity Risk management practices on financial performance of water service providers; a case of NZOWASCO in Bungoma County. The study specifically established the effect of liquidity risk management. The study was anchored upon Liquidity risk theory and anticipated income theory and trade off theory. The study used descriptive survey research design. A total of 115 employees of NZOWASCO water services in Bungoma County comprised the study population. A pilot study was conducted in order to test the validity and reliability of the research questionnaire. Content validity of the research instrument was tested by consulting the supervisor in giving informed professional judgment while reliability was tested using Cronbach’s alpha coefficient. For the primary data, semi-structured questionnaire was administered to the WSP employees of the institutions concerned. The secondary data for the study was drawn from published articles, journals and audited financial statements of NZOWASCO in Bungoma County. Both descriptive and inferential statistics was used for data analysis. Data was presented using tables, charts and graph. To investigate whether there was any statistical significant influence of cash flow management on financial performance of Water Service Providers of Bungoma County, the study finding concludes that Cash flow management does influence the financial performance of Water Service Providers. The study sought to determine the extent to which the presence of Liquidity risk influences the financial performance of Water Service Providers. The study finding also concluded that Liquidity risk does affect financial performance of Water Service Providers. To investigate whether there was any statistically significance influence of liquidity sources on financial performance of Water Service Providers of Bungoma County regression analysis was conducted. The study finding concludes that the liquidity sources influence financial performance of Water Service Providers. To investigate whether there was any statistically significance moderating influence of government regulation on the relationship between liquidity management and financial performance of Water Service Providers   regression analysis was conducted. The equation above indicates that one unit change in Liquidity management   results in unit change in the relationship between liquidity management and financial performance of Water Service Providers, while a unit change in the interactive effects of the government regulation and Liquidity management results inunit increases in financial performance of Water Service Providers