The Impact of Financial Risk on Financial Performance: A Case of Listed Manufacturing Companies in Tanzania

The study assessed the impact of financial risk on the financial performance oflisted manufacturing firms in Tanzania at the Dar es Salaam Stock Exchange(DSE). Proxies used to represent financial risk, as independent variables, werecredit risk and liquidity risk, and financial performance metrics were return onassets (ROA) and return on equity (ROE). A quantitative research design wasused to gather secondary data from audited financial statements of listedmanufacturing firms at DSE from 2008 to 2022 (15-year period). The balancedpanel regression model was used to test the hypotheses by using Stata 11 softwareas a tool for analysis. The result reveals that liquidity risk exerts a positive andsignificant impact on ROA. In contrast, credit risk exerts a negative andsignificant impact on ROE. These findings highlight the importance of enhancingrisk management practices and prudential oversight to safeguarda manufacturing firm’s financial performance. The analysis may assist investors,both current and prospective, government officials, financial managers, brokers,and the authority dealing with investments in the manufacturing companies listedunder DSE to formulate policies and analyze their investments to increase valueto stakeholders and look for a better way of stabilizing the economy of thesecompanies and the national economy in general