Mitigation of risks by institutional equity investors at the Nairobi stock exchange
Abstract
The purpose of this study was to determine the risk mitigation practices
employed by Fund Managers at the Nairobi Stock Exchange (NSE). To
determine the risk mitigation practices employed fund managers at the Nairobi
Stock Exchange. The study had two objectives: to identify the risk mitigation
practices employed by fund managers at the NSE and to determine challenges
faced by fund managers involved in risk mitigation at the Nairobi Stock
Exchange.
The population of the study consisted of thirteen Fund Managers and a census
study was adopted. Data collection was by means of a semi-structured
questionnaire and was analyzed using SPSS software; the findings were
presented using tables.
The findings reveal that the risk mitigation strategies adopted by the fund
managers include due diligence, portfolio diversification and hedging. Growth
potential of the stock, results of ratio analysis and management quality were
used to evaluate suitable stock. Important risk acceptance criteria include level of
sales, relationship. of the stock's owner to government, industry performance,
market share of the stock owner and the stocks earning potential. Sophisticated
investor activity and attitude were important in aiding risk mitigation.
Challenges encountered in risk mitigation were insider trading and accounting
impropriety. The study recommends that additional risk mitigating instruments
such as zero coupon bonds, perpetuals and other bond variants, asset backed
mortgage securities and debt equity hybrids be introduced to complement the
risk mitigation situation at the Nairobi Stock Exchange
Citation
Masters of business administrationSponsorhip
University of NairobiPublisher
school of Business, University of Nairobi