FOREIGN INVESTMENT RISK ON FINANCIAL PERFORMANCE OF PENSION FUND FIRMS IN KENYA
Abstract
The main objective was to analyze the influence of foreign investment risk on financial performance of pension fund firms in Kenya. The study was guided by shiftability theory of liquidity, efficient market hypothesis theory, the portfolio balance hypothesis and enterprise risk management theory. These theories explained the effect of foreign investment risk (liquidity risk, market risk, foreign exchange risk and operational risk) on financial performance of pension fund firms in Kenya. This study comprised of 29 registered administrators, 24 registered pension fund managers and 16 actuaries/ fund scheme advisors as at 31st Jan 2022 classified by RBA (2022). The sample size for this study was obtained using the stratified random sampling method. This study used primary data was collected through the use of questionnaires. This study also utilized secondary data from published reports and financial statements of the pension funds collected from the PFAIs’ Website, RBA, and pension schemes. The researcher used self-introduction letters to gain entry into the sample organizations. A pilot study was also conducted in order to establish the validity and reliability of the questionnaire. In this study, the Cronbach’s alpha was used to test the reliability of all the measures in the questionnaire. This study used both construct validity and content validity. Data analysis was guided by the aims and objectives of the research and the measurement of the data that was collected. Quantitative data were analysed using SPSS version 28 where the relationships between variables were assessed using correlation and regression analysis. The findings were in the form of tables, percentages and tabulations. The research results indicated that liquidity risk, market risk, foreign exchange risk and operational risk negatively influenced financial performance of pension fund firms in Kenya. Therefore, the study concluded that foreign investment risks negatively affected financial performance of pension fund firms in Kenya. The study recommended that pension fund managers should adopt foreign exchange management practices to protect earning fluctuations and also put in place conventional risk management where they should adopt proactive practices and forewarned by market risk management division with the scale and nature of business and its risk profile.
Key Words: liquidity, market, foreign exchange, operational risk
CITATION: Mahmoud, M. H., & Wamiori, G. (2022). Foreign investment risk on financial performance of pension fund firms in Kenya. The Strategic Journal of Business & Change Management, 9 (4), 440 - 461.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i4.2423
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