Financial Risk and Financial Performance: Evidence and Insights from Commercial and Services Listed Companies in Nairobi Securities Exchange, Kenya
Onsongo, Susan Kerubo
Muathe, Stephen M. A.
Mwangi, Lucy Wamugo
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In Kenya, the last few years has seen the performance of companies listed under the commercial and services segment on the Nairobi Securities Exchange (NSE), experience mixed fortunes. The study sought to assess the implications of financial risk on the performance of these companies. The study applied explanatory research design. The target population were the 14 companies listed under this segment of NSE. Secondary panel data contained in published annual reports for the period 2013–2017 was collected. Panel regression model was applied with the random e ect model being used based on the Hausman specification test. Findings showed that credit risk had an insignificant positive e ect on return on equity (ROE) while liquidity risk had a significantly negative e ect on ROE and operational risk had a positive insignificant e ect on ROE. The positive coe cients from the data analysis indicated that commercial and service companies at NSE were able to take in more credit to boost performance of these companies however the negative coe cients shows that within the period of study these companies experienced high liquidity problems in that the current liabilities exceeded the current assets. Thus, concluding that these companies were unable to pay all their obligation when they were due.