Abstract:
This study investigated the factors affecting financial derivatives in financial performance in
Nairobi securities exchange market in Kenya financial sector and had the following specifi
objectives: To determine effect of financial innovation in financial performance of the NSE, to
determine the effect of legal and regulatory framework in financial performance in the NSE
market, to investigate the effect of risk management in the financial performance of the NSE.
The study was conducted through a descriptive survey of 7 listed firms in the NSE market. sampl
consisted of 7 company listed by the NSE market. The data was analyzed through questionnair
and descriptive analysis with the help of the Statistical Package for Social Sciences software
(SPSS). This gave distribution measures for the data collected such as frequency and percentages.
The qualitative data was presented in narrative form under relevant identified themes while the
quantitative data was presented in form of figures and tables including charts and tables.
The study found that the Kenyan Financial derivatives market is still in the development stage a
characterized by the poor technology in the marketing of the derivatives, political unrest in th
country and discourage of the small enterprises by the big firms into the NSE entry. Usage of
financial derivatives in Kenya was mainly found to be highly demanded by the need for many
firms and financial institutions to hedge risk of losses from political, interest rates and the
fluctuating value of the Kenyan currency. The study also found the main challenge facing financial
performance of the financial derivatives in Kenya also include poor structural facilities including
poor trading platforms, poor governors in the systems and weak trading leadership. The study also
concluded that the financial performance of financial derivatives in Kenya would only be possible
if financial innovation, legal and regulatory framework and the company size were well funded b
the government in Kenya.
The study recommends that the Capital Markets Authority, Central Bank and the Government in
Kenya take serious in investing in the financial derivative market growth for the increased
improvement in the financial performance.
