EFFECTS OF FOREIGN EXCHANGE HEDGING PRACTICES ON FINANCIAL PERFORMANCE OF NON-FINANCIAL FIRMS: A CASE OF LISTED COMPANIES AT NAIROBI SECURITY EXCHANGE

Abstract

The purpose of this study was to analyze the effect of foreign hedging practices on financial performance of non-financial firms listed at the Nairobi Securities Exchange. This study adopted a descriptive design. This descriptive research design was preferred because the study needed to establish the effect of foreign hedging practices on financial performance of non-financial firms listed at the Nairobi Securities Exchange. The study targeted a population of all 39 listed non-financial firms at NSE in Kenya. The questionnaire comprised of both open and closed ended questions. SPSS was used to produce frequencies, descriptive and inferential statistics which was used to derive conclusions and generalizations regarding the population. Regression analysis was used to show the sensitivity of profitability (PBT), ROA and ROE to various independent variables. Coefficient of determination (R 2) was used to measure the amount of variation in the dependent variable explained by the independent variable Information was sorted, coded and input into the statistical package for social sciences (SPSS) for production of graphs, tables, descriptive statistics and inferential statistics. Descriptive statistics included; frequencies, mean and standard deviation. Data analysis output was presented using tables and cartographies like pie charts and line graphs. The study findings indicated that employees were concerned about the financial performance so as to enhance the whole organizations performance. This was demonstrated by the extent of agreement with the statements in the questionnaire in support of the financial performance. Results indicated that swaps, currency futures, options and forward contracts influenced financial performance of non-financial firms positively. Results also led to a conclusion that training had increased efficiency and job satisfaction among the employees hence the organizational performance at large. The study recommends that the firms listed in the Nairobi Stock Exchange should explore avenues to enhance capacities within firms for managing foreign currency risk exposure. They should explore the route of continued education for those in workplaces through short term training that should be very practical oriented, this could involve professional organizations for finance specialists, bankers, accountants and consultants.