Impact of Exchange Rate Appreciation on Financial Performance of Manufacturing Companies Listed at Nse, Kenya

Purpose: To examine the impact of exchange rate appreciation on financial performance of manufacturing companies listed at NSE, Kenya. Design/Methodology/Approach: This study adopted a longitudinal and correlational research design. The target population of this study comprised 8 listed manufacturing companies operating within Nairobi Securities exchange, Kenya. Given the large number of manufacturing firms in Securities exchange, the study employed a census survey implying that all the 8 firms were used in the study for a 12-year period (2014-2015) giving 96 observations. The quantitative data obtained from financial statements was analyzed using the STATA version 18. Descriptive statistics such means and standard deviations were used to summarize and describe the characteristics of study constructs. Data was presented using tables. Findings: Exchange rate depreciation had a negative and significant effect on financial performance of manufacturing companies listed at NSE, Kenya (β = -8.234, p<0.01). Implications/Originality/Value: The study suggests that manufacturing companies implement formal hedging programs with forward contracts and options, adopt more varied income structures and purchasing strategies, and have flexible operating practices. The Central Bank of Kenya should focus on exchange rate stabilization policies, and design financial markets that facilitate firm-level hedging activities to help increase resiliency of the manufacturing sector.