Exchange Rate and Financial Performance of Non-Financial Firms Listed at the Nairobi Securities Exchange, Kenya

Abstract

The study sought to establish the effect of exchange rate on financial performance of Non Financial Firms listed on the NSE, Kenya. In carrying out the study, Modern Portfolio Theory and Deflation Theory were adopted. The research was based causal research design and the population comprises of the non-financial companies listed at the NSE in Kenya as from January 2013 to December 2017 which are 41 in number. Therefore, the study was based on a census. This research utilized panel data which was be extracted with the use of a secondary data collection schedule. Data was analyzed using stata software version 14 where the analysis was based on descriptive analysis and regression analysis. The findings of the reveal that exchange rate had a negative and significant effect on financial performance of non financial firms listed on the NSE, Kenya. The study recommends that firms should engage in cross border operations, that is, firms should have branches in foreign countries as these will aid in cushioning the effect of currency depreciation on financial performance of firms. Further studies can utilize other measures of financial performance such as return on equity and net interest margin. Other studies can also consider internal factors such as firm size and how they affect the relationship between systematic risk factors and non financial firms listed at the Nairobi Security Exchange, Kenya