Browsing by Author "Mwalolo, Sylvia Chiru"

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    Financial Risk Management and Financial Performance of Investment Firms Listed at Nairobi Securities Exchange, Kenya
    (ijsrp, 2023-08) Mwalolo, Sylvia Chiru; Omagwa, Job; Kimutai, Caroline
    Financial performance is a crucial aspect for investment firms as it reflects their overall stability and communicates their financial well-being to investors. Some investment firms in Kenya are currently experiencing a decline in financial performance. This study focused on four dimensions of financial risk management (interest rate risk, exchange rate risk, inflation rate risk, and liquidity risk) to examine the effectiveness of risk management strategies in enhancing financial performance. The study equally assessed the moderating effect of firm size. Primary and secondary data sources were utilized, with a sample size of 40 respondents selected from the five listed investment firms. Data collection spanned eight years from 2014 to 2021. Multiple regression analysis, descriptive statistics, and diagnostic tests were employed. The study found that effective management of interest rate risk, exchange rate risk, inflation rate risk, and liquidity risk significantly affect financial performance. Additionally, firm size was found to moderate the relationship on financial performance. The study imparts valuable understandings regarding the significance of strategies for managing financial risks within investment firms. The study recommends management support for managing exchange rate risk through strategies like currency invoicing, leading and lagging, and exposure netting. It suggests the use of appropriate financial instruments such as forward rate agreements and options, as well as maintaining a diverse bond portfolio, to improve the management of interest rate risk. Effective liquidity risk management, including techniques such as cash flow forecasting and optimizing net working capital, is also highlighted. Managing inflation rate risk requires portfolio adjustment techniques, necessary spending adjustments, and continuous monitoring of changing inflation dynamics. Furthermore, the study recommends that policymakers in Kenya encourage investment firms to provide comprehensive risk disclosures in their financial reports. By implementing these recommendations, investment firms can enhance their financial performance and strengthen their risk management practices.
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    Financial Risk Management and Performance of Investment Firms Listed at Nairobi Securities Exchange, Kenya
    (Kenyatta University, 2024-04) Mwalolo, Sylvia Chiru
    Investment firms play a pivotal role in the economic landscape of Kenya, contributing significantly to GDP and employment levels. The financial performance of these firms is of utmost importance, providing a comprehensive view of their overall stability and communicating their financial well-being to investors. However, recent trends suggest a concerning decline in the financial performance of these firms, necessitating a closer examination of their financial risk management practices. This study investigates the effect of financial risk management strategies, focusing on interest rate risk, exchange rate risk, inflation rate risk, and liquidity risk, on the financial performance of listed investment firms in Kenya. Additionally, it explores the moderating effect of firm size on this relationship. The study hypotheses were evaluated at the 0.05 level of significance. Expectations Theory of Exchange Rates, Arbitrage Pricing Theory, Agency Theory, Liquidity Preference Theory, and Modern Portfolio Theory were the theories underpinning the study. Using a positivist research philosophy and explanatory research design, data spanning from 2014 to 2021 were collected from five selected investment firms, with 40 respondents purposively sampled. Techniques including descriptive statistics and multiple regression analysis were employed to analyse the data. To ensure that the data is suitable for multiple regression analysis, diagnostic tests (multicollinearity, normality, and heteroscedasticity) were performed. The data was visually represented through the use of tables, charts and graphs. The study took into account all the necessary ethical considerations. The findings reveal significant positive effects of interest rate risk management (p = 0.025), exchange rate risk management (p = 0.017), inflation rate risk management (p = 0.020), and liquidity risk management (p = 0.007) on financial performance. Moreover, firm size significantly moderates this relationship (p = 0.002). The study underscores the critical need for effective financial risk management strategies within investment firms. Recommendations include implementing currency invoicing and exposure netting to manage exchange rate risk, utilizing financial instruments such as forward rate agreements to mitigate interest rate risk, optimizing net working capital for liquidity risk management, and adopting portfolio adjustment techniques for inflation rate risk management. The study suggests that policymakers in Kenya should take an active role in encouraging investment firms to provide comprehensive risk disclosures in their financial reports. Furthermore, future research could delve into individual variables' effects on investment firms' financial performance, expanding beyond listed entities to encompass the broader Kenyan context.