Financial Risk and Financial Performance: Evidence and Insights from Commercial and Services Listed Companies in Nairobi Securities Exchange, Kenya

Susan Kerubo Onsongo, Stephen M. A. Muathe and Lucy Wamugo Mwangi
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Susan Kerubo Onsongo: Department of Accounting and Finance, School of Business, Kenyatta University, Nairobi P.O. Box 43844-00100, Kenya
Stephen M. A. Muathe: Department of Business Administration, School of Business, Kenyatta University, P.O. Box 43844-00100 Nairobi, Kenya
Lucy Wamugo Mwangi: Department of Accounting and Finance, School of Business, Kenyatta University, Nairobi P.O. Box 43844-00100, Kenya

IJFS, 2020, vol. 8, issue 3, 1-15

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 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.

Keywords: financial performance; financial risk; commercial and services companies; Nairobi Securities Exchange (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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