Browsing by Author "Mohamud, Ahmed Mohamed"

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    Financial Risk Hedging and Financial Performance of Commercial Banks Listed in Nairobi Securities Exchange, Kenya
    (Journal of Finance and Accounting, 2025-01) Mohamud, Ahmed Mohamed; Kimutai, Carolyne; Kariuki, Grace
    In Kenya, financial institutions play a vital role in economic development by facilitating investments through receiving and lending funds, but they face market-driven financial risks that impact their performance, including a decline in Return on Assets over the past decade. This study aimed to determine the relationship between financial risk hedging techniques and the financial performance of Kenyan commercial banks listed on the Nairobi Securities Exchange (NSE). The study's specific objectives included forward contract, future contract, currency diversification of currencies, and swaps hence bank size is used as moderating variables. The agency theory, profit maximization theory, and enterprise risk management theory supported the study, providing a theoretical foundation for exploring the relationship between financial risk hedging and the financial performance of publicly traded commercial banks in Kenya. A descriptive correlational approach was adopted to target all publicly traded commercial banks in Kenya, with a census conducted to ensure comprehensive coverage. Secondary data was collected annually over a five-year period (2017–2021) from publications by the Nairobi Securities Exchange and the respective commercial banks, utilizing a structured data collection form. Diagnostic tests, including normality, multicollinearity, heteroscedasticity, and stationarity, were performed, confirming that the data met the required assumptions for analysis. The data was subsequently transformed to ensure that regression analysis could be conducted without producing spurious results. Descriptive statistics were summarized using means and standard deviations, while correlation and regression analyses were employed to test the hypotheses and draw meaningful conclusions. The correlation analysis revealed that using forward contracts as a hedging strategy has a strong positive and significant impact on financial performance. The futures, swaps, and currency diversifications also they had positive correlation against financial performance, and they had significant relationship. The regression study revealed a strong positive link between risk hedging and financial success, indicating a noteworthy correlation. Forward and future contracts were revealed to be risk-hedging approaches with significant effects on commercial bank financial performance, implying that currency diversification and swaps had a positive and significant effect on financial performance. Size had a strong favorable impact on the link between risk hedging and financial performance. The study recommends that bank executives and stakeholders should adopt robust risk management approaches and diversification strategies to enhance financial performance and stability in the banking sector. The Central Bank of Kenya (CBK) should regulate high-risk financial hedging products and require banks to disclose their use of financial derivatives, while the government should create supportive policies to promote these tools, ultimately strengthening financial institutions and fostering economic growth.
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    Financial Risk Hedging and Financial Performance of Commercial Banks Listed in Nairobi Securities Exchange, Kenya
    (Journal of Finance and Accounting, 2025-01) Mohamud, Ahmed Mohamed; Kimutai, Carolyne; Kariuki, Grace
    In Kenya, financial institutions play a vital role in economic development by facilitating investments through receiving and lending funds, but they face market-driven financial risks that impact their performance, including a decline in Return on Assets over the past decade. This study aimed to determine the relationship between financial risk hedging techniques and the financial performance of Kenyan commercial banks listed on the Nairobi Securities Exchange (NSE). The study's specific objectives included forward contract, future contract, currency diversification of currencies, and swaps hence bank size is used as moderating variables. The agency theory, profit maximization theory, and enterprise risk management theory supported the study, providing a theoretical foundation for exploring the relationship between financial risk hedging and the financial performance of publicly traded commercial banks in Kenya. A descriptive correlational approach was adopted to target all publicly traded commercial banks in Kenya, with a census conducted to ensure comprehensive coverage. Secondary data was collected annually over a five-year period (2017–2021) from publications by the Nairobi Securities Exchange and the respective commercial banks, utilizing a structured data collection form. Diagnostic tests, including normality, multicollinearity, heteroscedasticity, and stationarity, were performed, confirming that the data met the required assumptions for analysis. The data was subsequently transformed to ensure that regression analysis could be conducted without producing spurious results. Descriptive statistics were summarized using means and standard deviations, while correlation and regression analyses were employed to test the hypotheses and draw meaningful conclusions. The correlation analysis revealed that using forward contracts as a hedging strategy has a strong positive and significant impact on financial performance. The futures, swaps, and currency diversifications also they had positive correlation against financial performance, and they had significant relationship. The regression study revealed a strong positive link between risk hedging and financial success, indicating a noteworthy correlation. Forward and future contracts were revealed to be risk-hedging approaches with significant effects on commercial bank financial performance, implying that currency diversification and swaps had a positive and significant effect on financial performance. Size had a strong favorable impact on the link between risk hedging and financial performance. The study recommends that bank executives and stakeholders should adopt robust risk management approaches and diversification strategies to enhance financial performance and stability in the banking sector. The Central Bank of Kenya (CBK) should regulate high-risk financial hedging products and require banks to disclose their use of financial derivatives, while the government should create supportive policies to promote these tools, ultimately strengthening financial institutions and fostering economic growth.
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    Financial Risk Hedging and Financial Performance of Commercial Banks Listed in Nairobi Securities Exchange, Kenya
    (Kenyatta University, 2025-11) Mohamud, Ahmed Mohamed
    Commercial bank contributes economic growth that is the GDP worldwide but there is no clearly compounded percentage to show how much contributed by commercial banks worldwide each country has its own percentage in UK 177% GDP and USA 184% of GDP in 2021 as same as African no single percentage but each country has its own percentage like south Africa 58.6%.In Kenya financial institutions specially commercial banks play key role in economy development by contributing 47.1% growth of GDP in 2021; they receive and lend money to the investors. Due to the nature of their function’s commercial banks face financial risks that originate from the market which affects their financial performance. In the past 10 years, the commercial Banks reported decline of Return on Asset. The hedging techniques are tools used to minimize the financial risks that can affects value of firms. This study's specific goal is to determine whether financial risk hedging and Kenyan commercial banks' financial performance which are publicly traded on the Nairobi Security Exchange (NSE) are related. The study's specific objectives include forward contract, future contract, currency diversification of currencies, and swaps hence bank size is used as moderating variables. The agency theory, profit maximization theory, Modern portfolio theory, Enterprise risk management theory and capital asset pricing theory are all supporting hypotheses in the study. The study used a descriptive correlational approach to target all publicly traded commercial banks in Kenya and conducted a census. Secondary data was gathered annually over a five-year period (2017-2021) from publications by the Nairobi Securities Exchange and the respective commercial banks using a data collection form. Normality, multicollinearity, heteroscedasticity, and stationarity tests were performed as part of the diagnostic process, where hence the data collected shown normality. Means and standard deviation were used for descriptive statistics. Correlation and regression analysis were used to test hypotheses and develop conclusions. The correlation analysis revealed that using forward contracts as a hedging strategy has a strong positive and significant impact on financial performance. The futures, swaps, and currency diversifications also they had positive correlation against financial performance,hence they significantly related. The regression anaylsis was used to test the hypothesis hence the study shiown that the null hypothesis was rejected and indicated that there was strong and positive relationship between the indepedent variables; forwad contructs,future contracts swaps and currency diversifications and dependent variables which is financial performance of commercial banks. Size had a strong impact on between risk hedging and financial performance which was the larger size the higher the risk. The study suggested that the commercial bank to use on more financial derivatives as risk hedging hence it mitigates the risk and adds value to firms . the CBK Kenya and other regulatory bodies should encourage and offer more traning in financial derivatives since it indroduced recenctly that is 2019.