Effect of Financial Risk Management on Financial Performance of Firms Listed in the Nairobi Securities Exchange

Abstract

Purpose: The main purpose of this study was to determine the effect of financial risk management on financial performance of firms listed at the Nairobi Securities exchange.Methodology: The study employed descriptive design. The target population for the study was all the chief financial officers of all the 61 listed firms at the Nairobi Securities Exchange. The study employed a census survey of the 61 CFO’s of the listed firms at the NSE. The study utilized a semi-structured questionnaire to collect primary data. . The collected data was coded into SPSS 23 for subsequent descriptive and inferential statistics. Descriptive statistics was presented through frequencies, percentages, means and standard deviation. The inferential statistics was presented using regression model summary and correlation coefficients. The findings were further presented using charts and tables.Results: The findings of the research showed there was a positive and significant association between financial risk management strategies as evidenced by the coefficient of determination R2 = .205. The results of the study further indicated that asset structuring management and risk avoidance practices had a positive and significant influence on financial performance. The study concluded that with proper asset structuring management practices a firm can improve its performance on the stock exchange. Further the research findings showed that risk avoidance practices can positively enhance the financial profitability of listed firms.Unique Contribution to Theory, Policy and Practice: The study recommends that listed firms should enhance their financial risk management practices to be in tandem with growing international standards and globalization. The study also recommends that the regulatory authorities should establish policies laws that take note of the risks that company take and provide them with certain incentives on the bourse.

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