ABSTRACT
This study sought to determine the effect of financial risk on performance of non-financial firms listed at Nairobi Securities Exchange. The study used descriptive cross-sectional approach and longitudinal design. The population of the study included all listed firms at the Nairobi Securities Exchange as at 31st December 2019. The study employed secondary data. The source considered was Nairobi Securities Exchange database during 2015 to 2019. The determination of the significance of each variable under study was done using the t-test, p-values and F-test. Pearson correlation coefficient and multiple regressions were used. The study established a moderate relationship to the extent that the predictors identified in the study might not be greatly affecting financial performance of non-financial firms listed in Kenya. This meant a strong possible existence of certain issues affecting financial performance other than the financial risks considered in this study. Ensuing from the research objectives, it is concluded that financial risk affects financial performance of non-financial firms listed in Kenya. The p-value also leads to a conclusion that there is a significant association between financial risk and financial performance. Further, the study concluded that the extent to which financial risks affected financial performance was moderate to the extent that there is a strong possibility of existence of other certain issues affecting financial performance other than the financial risks considered in this study. The study recommends that the managements of listed non-financial firms should constantly work on effective management of financial risks to maximize financial performance. The financial risks may come from sources such as inefficiencies related to operational issues. The management could reduce financial risks by ensuring efficient working capital and debt management. The management of the firms would also invest in latest technologies to facilitate working capital management to maximize financial performance.
Key words: Financial risk; Financial Performance; Non-Financial Firms