| dc.description.abstract | Globally, Financial Performance of listed insurance companies reflects steady growth, which has over time varied across economies. For developing economies like Africa, the performance has revealed weaker growth reflected by declining premium trends. Kenya’s performance of listed insurance companies has been fluctuating. Despite its significant contribution to the national GDP, financial performance of these insurance firms generally remains low and unstable, as evidenced by aggregate profit and loss movement from 2011 to 2020; with Ksh.14,990,949, Ksh.13,104,366, Ksh.20,235,884, Ksh.17,232,664, Ksh.13,635,098, Ksh.12,832,644, Ksh.13,642,971, Ksh.7,269,263, Ksh.15,119,923, Ksh.6,388,958 respectively. Such poor financial economic value-addition, threatens economic growth. Literature demonstrates credible but inconsistent relationships between portfolio management and financial performance. Previous studies have tested the association between portfolio management, cash flows and firm’s financial performance, for listed insurance firms in the NSE; focussing on either accounting-based or/and market-based performance measures, which fails to predict the value creation abilities of the firm. Despite knowledge on portfolio management and cash flow on financial performance, it remains desirable to determine Economic Value-Added outcome of cash flow and portfolio management for the listed insurance firms in Kenya. Whereas studies assume nonexistence of intermediaries, the interaction operates on cash flow platform. The purpose of this study was to evaluate the mediating effect of cash flow on the relationship between portfolio management and financial performance of insurance firms listed at NSE. Specifically, it sought to; determine the relationship between portfolio management and financial performance, cash flow and financial performance, portfolio management and cash flow and evaluate the mediating effect of cash flow on the relationship between portfolio management and financial performance of NSE listed insurance firms. Modern portfolio, pecking order and Agency theories guided the study, while Correlational research design was used. Target population comprised six listed insurance companies reviewed for 10 years. Panel multiple correlation was used to analyse data. Results revealed; positive and significant effect of portfolio size on financial performance at (β = 0.5254, p = 0.0000) implying that a unit increase in portfolio size leads to 52.54% increase in financial performance, negative but significant effect of Portfolio asset allocation at (β = -0.4138, p = 0.0016) implying that a unit increase in portfolio asset allocation results in 41.38%decrease in financial performance, and portfolio risk at (β = - 0.1317, p = 0.0632)implying that a unit increase in portfolio risk results in a 13.17% insignificant decrease in financial performance. Cash flow has positive significant effect at (β = 0.3314; p = 0.0021) implying that a unit increase in cash flow results in 33.14% increase in financial performance and partially mediating the relationship between both portfolio size (indirect effect = 0.1622) and portfolio asset allocation (indirect effect = -0.08452) and financial performance. The study concludes that portfolio size and portfolio asset allocation are significant predictors of financial performance; while cash flow mediates the relationship between portfolio size, portfolio asset allocation, and financial performance. It is recommended that the NSE listed Insurance firms restructure portfolio management elements which will partially but significantly influence cash flow and in turn influence the firm’s financial performance; to assist policy makers and structuring of portfolio management. | en_US |
