Moderating Effect of Corporate Governance on the Relationship Between Accounts Receivable Period and Financial Performance of Non-Financial Firms Listed on the Nairobi Securities Exchange, Kenya

Abstract

This study examined the moderating effect of corporate governance on the relationship between accounts receivable period and financial performance of non-financial firms listed on the Nairobi Securities Exchange (NSE). The study adopted an explanatory research design and positivist philosophy, using a longitudinal research strategy and secondary panel data covering ten years, from 2016 to 2025. A census of 32 eligible non-financial firms generated 320 firm-year observations. Financial performance was measured using Return on Assets (ROA), while the accounts receivable period was measured as trade receivables divided by credit sales, multiplied by 365 days. Corporate governance was measured using a composite governance index, while firm size, measured as the natural logarithm of total assets, served as a control variable. Data were analysed using descriptive statistics, Pearson correlation, and hierarchical panel regression analysis. The accounts receivable period averaged 88.311 days (SD = 21.259) and had a negative and statistically significant association with financial performance (r = -.3981, p = .05). It also had a negative and statistically significant direct effect on financial performance (? = -0.0055, p = .000). Corporate governance had a positive and statistically significant direct effect on financial performance (? = 0.3767, p = .000). The interaction between corporate governance and accounts receivable period was positive and statistically significant (? = 0.0180, p < .05), indicating that corporate governance significantly moderates the relationship by weakening the negative effect of prolonged receivables collection. The study concludes that stronger corporate governance enhances credit management and receivables collection, thereby cushioning firms against adverse financial consequences.