Financial Risk and Financial Performance: Evidence and Insights from Commercial and Services Listed Companies in Nairobi Securities Exchange, Kenya
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Date
2020
Authors
Onsongo, Susan Kerubo
Muathe, Stephen M. A.
Mwangi, Lucy Wamugo
Journal Title
Journal ISSN
Volume Title
Publisher
MPDI
Abstract
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.
Description
A research article published International Journal of Financial Studies
Keywords
financial performance, financial risk, commercial and services companies, Nairobi Securities Exchange
Citation
Onsongo, S. K., Muathe, S., & Mwangi, L. W. (2020). Financial Risk and Financial Performance: Evidence and Insights from Commercial and Services Listed Companies in Nairobi Securities Exchange, Kenya. International Journal of Financial Studies, 8(3), 51.