| dc.description.abstract | The recent global financial crisis has led to the development of derivatives markets in most of
developed economies. Derivatives are the major icon among risk management practices.
Firms usually use derivatives to hedge their foreign exchange and interest rate risks. This
study aimed to examine the effect of Financial Innovation Techniques on Risk Management
by Non-Financial Institutions in Kenya. The study adopted a descriptive research design and
used primary data from 39 non-financial firms listed in Nairobi Securities Exchange of which
31 firms responded. Based on the theoretical investigation, we find that institutions use
derivatives for hedging, liquidity and risk management purposes. Also, there is evidence that
arbirageous and speculators use derivatives too for different reasons. Despite challenges such
as complexity in use of derivatives and lack of organized markets, the efficacy of derivatives
as a means of managing economic and other forms of risks remain widely accepted. Data
collected was used to develop a multiple regression model using SPSS. From the findings
information diffusion, transparency, skills and regulations and technology support at 1%, 5%,
and 10% level significance, were significant in explaining the variation in derivatives usage.
These findings suggest that financial innovation strategies are associated with risk
management. | en_US |
