Financial Risk Hedging Practices, Management Strategies and Debt Capacity: Theoretical Review
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Date
2019
Authors
Wangui, Damaris
Jagongo, Ambrose
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
There has been a rapid increase in nonfinancial firms leveraging their balance
sheet, which seem to have constrained
their borrowing space thus reducing the
volume of credit uptake. Leverage has
been rising since 2015 thus reducing the
borrowing capacity of these companies.
Majority of these firms are the top large
borrowers therefore, corporate sector
weaknesses across a majority of economic
sectors largely restricted their ability to
borrow and expand the asset side of banks.
Kenya is heavily dependent on imports
and hence its market aggregates are
vulnerable to external shocks. Exchange,
inflation and interest rates have been
highly volatile in Kenya and this is not
helped by the fact that most non-financial
firms don’t have concrete policies on
financial risk hedging therefore the need
for hedging in those firms listed in Kenya.
This paper offers a background on
financial risk hedging practices,
management strategies and debt capacity.
It also provides a theoretical and empirical
overview on the relationship between
financial risk hedging practices,
management strategies and debt capacity
by reviewing other literature on the topic.
This paper concludes that hedging
practices, management strategies and debt
capacity are related and therefore assessing
firms’ debt capacity is crucial as it also
affects firm performance.
Description
Research article
Keywords
Financial risk hedging practices, Management strategies, Debt capacity, Non-financial
Citation
Wangui, D. & Jagongo, A. (2019). Financial risk hedging practices, management strategies and debt capacity: Theoretical review, International Academic Journal of Economics and Finance, 3(3), 218-230