TRANSACTION RISK MITIGATION AND THE SECURITIES MARKET FINANCIAL PERFORMANCE OF LISTED INSURANCE FIRMS AT NAIROBI SECURITIES EXCHANGE

Kenneth Kipyego Toroitich, Dr. Kimani E. Maina, Dr. Julius Miroga

Abstract


The performance of the securities market globally plays an important role in both local and international markets. The high rise of such markets has given an increase in the number of risks associated with firms registered on the stock market. This study therefore sought to examine the effect of translation risk mitigation on the securities market financial performance of listed insurance firms in Kenya. The study adopted a descriptive research design and a quantitative research approach. The target population was 548 staff working in finance, investment, risk, actuarial, and operations departments in the six insurance firms listed in the Nairobi Securities Exchange. The sample size was determined using Yamane's Formula and stratified random sampling was used in the selection of the sample size. The study made use of both primary and secondary data. The study used a data extraction tool to collect secondary data from the annual reports and financial statements of the insurance companies. The study made use of structured questionnaires to collect primary data. The questionnaires generated quantitative data. Descriptive and inferential statistics were used in analyzing quantitative data with the help of the Statistical Package for Social Sciences (SPSS version 24) statistical software. Descriptive statistics included frequency distribution, percentages, mean, and standard deviation. Inferential data analysis was done using the Pearson correlation coefficient and linear regression analysis. The study found that translation risk mitigation has a positive and significant effect on the securities market financial performance of listed insurance firms in Kenya. The study recommends that insurance firms should continue to employ a diverse range of hedging strategies to mitigate translation risks effectively. While currency swaps and forward contracts are commonly used methods, firms should explore other hedging instruments such as options and futures to further diversify their risk management portfolio.

Key Words: Translation Risk Mitigation, Securities Market, Financial Performance


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