Risk Assessment Controls and Financial Performance of Manufacturing Firms Listed in the Nairobi Securities Exchange – Kenya

Abstract

Proper risk assessment controls ensure that manufacturing firms have a gateway to detecting and preventing mismanagement and fraud in firms. However, in Kenya a significant number of failed firms in manufacturing industry listed on Nairobi Securities Exchange have appealed for bailouts from the government. This study, therefore, sought to determine the effect of risk assessment control on financial performance of manufacturing firms listed on the Nairobi Securities Exchange and the moderating effect of firm size on this relationship. The study was anchored on Efficient Structure theory and a descriptive research design was applied. The population of the study was 9 manufacturing firms listed on the NSE, Kenya. A Multistage and purposive sampling techniques were used to obtain a sample size of 7 firms and a stratified proportionate simple random sampling technique was used to obtain 93 respondents. A five year period information (2018-2022) on financial performance and firm size was obtained. A structured questionnaire as well as a checklist was used to collect primary and secondary data respectively. Secondary data was obtained from the manufacturing firms‟ annual audited financial statements. The data wasanalysed using simple regression model with the aid of Statistical Package for Social Sciences (SPSS) version 23.0. Hypotheses was tested using t-test while the overall significance of the model was tested using F-test at 5% level of significance. The study found that risk assessment controls has statistically significant positive effect on financial performance of manufacturing firms listed on the NSE, Kenya. Therefore, the study concluded that firms should adopt proper risk assessment controls to improve their financial performance.