Influence of Financial Risk Management on Performance of Real Estate Firms in Nairobi County, Kenya

Abstract

The present study set out to investigate how the performance of real estate firms is influenced by financial risk management with reference to firms within Nairobi County, Kenya. The study particularly sought to assess the influence of operational risk management on performance of real estate firms in Nairobi County, Kenya; to establish the influence of liquidity risk management on performance of real estate firms in Nairobi County, Kenya; to investigate the influence of currency risk management on performance of real estate firms in Nairobi County, Kenya; and to ascertain the influence of market risk management on performance of real estate firms in Nairobi County, Kenya. The study was anchored on agency theory, stakeholder theory, financial economic theory and new institutional economics theory. A descriptive survey design was adopted in the study, and the target population comprised of the 80 licensed firms by the Nairobi County Government which had been in business for over three years with focus on real estate agent officers. From the population of 80 real estate firms, samples of 66 firms were selected. The researcher developed and used a questionnaire as the key data collection instrument. Data collected were quantitative in nature. Quantitative data were analyzed by descriptive analysis. Statistical tools including Statistical Package for the Social Sciences (SPSS) version 26 helped the researcher to analyze and describe the data. Further, ANOVA and regression correlation analysis was conducted. The results were analyzed in frequencies and percentages.From the analysis, the study concluded that there was positive and important relationship between operational risk management and performance of real estate firms(β = .122, p = .000<.05); between liquidity risk management and performance (β = .996, p = .000<.05); between currency risk management and productivity (β = .272, p = .000<.05); and between market risk management and productivity of real estate firms (β = .215, p = .000<.05). The study recommends sound mechanisms for real estate firms to increase the performance, the firms should aim at reducing the possibility of deferred maintenance, reduce risk of rising expenses to keep the real estate operational, reduce the possibility that the installed technology will not negatively influence the core business process and ensure that they reduce health and safety related incident performance risk. In addition, firm managers should assign tasks associated with marketing to third parties, such as brokerage organizations to reduce cost.