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Title: EFFECT OF FOREIGN EXCHANGE RISK ON SHAREHOLDERS' WEALTH OF COMMERCIAL BANKS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA
Authors: Margaret Wanjiru Mogusu and Nancy Karinthoni Mustafa
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Margaret Wanjiru Mogusu and Nancy Karinthoni Mustafa Department of Management science, Chuka University, P. O. Box 109-60400, Chuka.
MLA 8 Mogusu, Margaret Wanjiru, and Nancy Karinthoni Mustafa. "EFFECT OF FOREIGN EXCHANGE RISK ON SHAREHOLDERS' WEALTH OF COMMERCIAL BANKS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA." Int. j. of Social Science and Economic Research, vol. 8, no. 3, Mar. 2023, pp. 413-425, doi.org/10.46609/IJSSER.2023.v08i03.005. Accessed Mar. 2023. APA 6 Mogusu, M., & Mustafa, N. (2023, March). EFFECT OF FOREIGN EXCHANGE RISK ON SHAREHOLDERS' WEALTH OF COMMERCIAL BANKS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA. Int. j. of Social Science and Economic Research, 8(3), 413-425. Retrieved from https://doi.org/10.46609/IJSSER.2023.v08i03.005 Chicago Mogusu, Margaret Wanjiru, and Nancy Karinthoni Mustafa. "EFFECT OF FOREIGN EXCHANGE RISK ON SHAREHOLDERS' WEALTH OF COMMERCIAL BANKS LISTED AT NAIROBI SECURITIES EXCHANGE, KENYA." Int. j. of Social Science and Economic Research 8, no. 3 (March 2023), 413-425. Accessed March, 2023. https://doi.org/10.46609/IJSSER.2023.v08i03.005.
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ABSTRACT: Shareholders’ wealth is among key decisions in a firm because it has a bearing in overall investor perception and firm value. There has been concern about declining value of shareholders’ wealth among commercial banks listed at the Nairobi Security Exchange (NSE). Previous studies have tried to link foreign exchange risk to shareholders’ wealth. The researchers however fail to agree on the magnitude and direction of the effect. It is not established how foreign exchange risk would affect shareholders’ wealth of commercial banks listed at the NSE. The objective of this study was to establish the effect of foreign exchange risk on Shareholders’ wealth of Commercial Banks listed at then NSE. Descriptive research design was adopted. The target population was eleven commercial banks that had been constantly listed at the NSE from 2013-2019. A census was conducted to collect data from the eleven banks due to the smallness of the population. Data was collected using a checklist. Data was obtained from published financial statements and the Banking survey publications for seven years from 2013 to 2019. Data was analyzed using simple and multiple regression analysis with the help of SPSS version 25.0. Hypothesis was tested using t-statistic at 5% significance level. The study found that foreign exchange risk had a positive effect on shareholders’ wealth (regression coefficient 4.308, p-value of 0.019). The findings suggest that a bank that invests in foreign investments yields high foreign income which will increase banks profitability resulting to increase in investors’ returns in terms of capital gain and dividends. The study recommends that commercial banks ought to come up with ways of minimizing this risk.

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