HOW GOVERNMENT POLICIES INFLUENCE THE IMPACT OF WORKING CAPITAL MANAGEMENT ON AGRICULTURAL FIRMS' FINANCIAL PERFORMANCE

This study examines the effect of accounts receivable management on the financial performance of listed agricultural firms on the Nairobi Securities Exchange (NSE). Working capital, which represents the operating liquidity available to a business, has a direct relationship with a firm's performance and cash flow within a one-year period. The financial performance of the agricultural sector saw a decline from 6.1% in 2018 to 3.6% in 2019, a 2.5% decrease attributed to inefficient working capital management practices. The study, grounded in operating cycle theory, transaction costs theory, agency theory, and transaction cost economics theory, adopted a descriptive research design. The target population was 505 individuals from top management, accounting, finance, and procurement departments of listed agricultural firms as of December 31, 2020, with a sample size of 319 respondents selected through stratified random sampling. Primary data were collected using closed questionnaires, while secondary data were obtained through a data collection sheet. Analysis involved descriptive statistics (mean, minimum, maximum, and standard deviation) and inferential statistics (correlation and regression analysis). Findings revealed a strong but negative correlation between accounts receivables and financial performance (r = -0.450, p < 0.01). The study concluded that cash conversion cycles significantly influence firms' spending capabilities. It recommended that listed agricultural firms adopt modern, technologically advanced inventory management systems to enhance efficiency, reduce turnaround time, and improve financial performance