Financial risk and financial performance: Evidence and insights from commercial and services listed companies in Nairobi Securities Exchange, Kenya

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 appl...

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Bibliographic Details
Published in:International journal of financial studies 2020-09, Vol.8 (3), p.1-15
Main Authors: Kerubo Onsongo, Susan, Muathe, Stephen M. A, Wamugo Mwangi, Lucy
Format: Article
Language:English
Subjects:
Annual reports
Business performance management
commercial and services companies
Corporate profits
COVID-19
Credit risk
Economic conditions
Economic crisis
Economic research
financial performance
Financial risk
Global economy
Management
Nairobi Securities Exchange
Researchers
Return on assets
Risk exposure
Securities listing
Stock exchanges
Studies
Theory
Trends
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Summary: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 effect model being used based on the Hausman specification test. Findings showed that credit risk had an insignificant positive effect on return on equity (ROE) while liquidity risk had a significantly negative effect on ROE and operational risk had a positive insignificant effect on ROE. The positive coefficients 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 coefficients 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.
ISSN:2227-7072
2227-7072
DOI:10.3390/ijfs8030051