The Effects Of Foreign Exchange Rate Volatility On The Financial Performance Of Listed Construction And Allied Companies In The NSE In Kenya

Abstract

The main purpose of this research objective was to investigate the effects of foreign exchange volatility on the financial performance of listed construction and allied companies on the NSE in Kenya. The research used a population of the five listed companies. Secondary data was generated from CBK and from annual financial statements of individual companies for a period of ten years from 2008 to 2017.Various scholars had performed similar studies on different area and the results obtained contradict each other. This study has however addressed various gaps found in the previous studies. The results show that foreign exchange volatility has a positive insignificant impact on financial performance of listed construction and allied companies. The model summary shows that predictor variables namely the foreign exchange rate volatility, inflation rate, sales volumes, total assets and the liquidity levels predicts 78.2% of the changes in the profit before tax margins. The model coefficients show that an increase in inflation arte and the total assets leads to a decrease in the profit before tax but an increase in the foreign exchange rate volatility, liquidity levels and the sales volumes leads to an increase in the profit before tax.This research therefore recommend that government come up with appropriate measures, policies and structures that helps to boost sales volumes such as special economic zones as well as manage the macro-economic variables such as inflation rate that negatively affects the financial performance of construction firms