Effect of Financial Risk Management on Financial Performance of Oil Companies in Kenya

Abstract

The purpose of the study was to determine the effect of financial risk management on financial performance of Oil Companies in Kenya. The study adopted causal research design. The study population consisted of all 85 Oil Companies operating in Kenya. The sample size of the study was comprised of 40 Oil companies in Kenya. The sample was selected based on stratified random selection of the companies listed by PIEA list of the market share of various companies. Semi-structured questionnaires were used to obtain primary data about the population. The study will also use secondary data. The study used quantitative techniques in analyzing the data using Statistical Package for Social Science (SPSS). A linear regression model of financial performance versus financial risk management techniques was applied to examine the relationship between the variables. The response on financial risk management techniques was quantified based on the responses derived from the Likert-Scaled questions. Piloting was carried out to test the validity and reliability of the instruments. It was conducted by the researcher taking some questionnaires to the Oil Companies headquarter in Nairobi which were filled by some respondents at random. The objective of the study was to establish whether financial risk management affects the financial performance of Oil Companies in Kenya. The study found that most Oil companies had highly adopted financial risk management practices to manage financial risk and as a result the financial risk management practices comprising of; understanding risk, risk identification, risk analysis and assessment & risk monitoring, have a positive correlation to the financial performance of Oil Companies in Kenya. The study recommends that that risk management techniques should be emphasized and utilized more effective by Oil companies in Kenya.