LIQUIDITY RISK MANAGEMENT AND FINANCIAL DISTRESS OF INSURANCE FIRMS LISTED AT NAIROBI SECURITY EXCHANGE, KENYA

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Published Jul 12, 2026

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ABDIRASHID B. M.
Msc Finance Student, School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya
KIMANI E. M., PhD
Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya
NDURUHU D. K., PhD
CIA, Jomo Kenyatta University of Agriculture and Technology, Kenya

Abstract

Financial distress continues to threaten the stability, solvency, operational continuity of insurance firms listed on the Nairobi Securities Exchange (NSE).Despite the critical role of these firms in risk mitigation, savings mobilization, and investment, there remains limited empirical evidence on how liquidity risk management contribute to their escalating financial distress. The objective of the study was to determine the influence of liquidity risk management on financial distress of insurance firms listed at Nairobi Security Exchange, Kenya. Guided by this objective, the study was anchored on the Liquidity Preference Theory.The study adopted a descriptive research design and targets all (6) six insurance firms listed at the NSE and applied a census approach due to the small and unique population. Secondary data covering a ten-year period (2016-2025) was collected using a secondary data collection sheet and extracted from audited financial statements and annual reports. The data was coded and analyzed using the Statistical Package for the Social Sciences (SPSS) version 25.0, employing descriptive statistics means, standard deviations, frequencies and inferential analysis including correlation and panel regression to determine relationships and effects among variables.The findings revealed that liquidity risk management had a negative and significant relationship with fianacial distress. Based on these findings, the study concluded that the  effect accounted for 62.1% of the variation in financial distress of insurance firms listed at the NSE,Kenya.The findings revealedliquidity risk management had a significant negative effect on financial distress (β = -0.317,  p < 0.05) on insurance firms listed at the NSE, Kenya.The study recommends insurance firms should adopt integrated risk-management frameworks that simultaneously address liquidity risk.

Article Details

Issue
Vol 7 No 1 (2026)
Section
Articles
Author Biographies

ABDIRASHID B. M., Msc Finance Student, School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya

Msc Finance Student, School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya

KIMANI E. M., PhD, Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya

Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya

NDURUHU D. K., PhD, CIA, Jomo Kenyatta University of Agriculture and Technology, Kenya

CIA, Jomo Kenyatta University of Agriculture and Technology, Kenya

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