Securities Exchange Research Articles

Quick Ratio and Financial Performance of Agricultural Firms Listed at the Nairobi Securities Exchange, Kenya

The study was informed by the continuous decline in financial performance of the Agricultural firms listed at the Nairobi Securities Exchange, Kenya. The study emanates from the Doctoral dissertation of the first author in which the co-authors served as supervisors. A census approach was adopted where secondary data from audited annual financial reports of all the six Agricultural firms listed at the Nairobi Securities exchange, Kenya was used, covering the period 2015 to 2022. Descriptive analysis and panel regression analysis were applied. Based on the outcome of the panel regression analysis, the study established that quick ratio has significant effect on financial performance of the Agricultural firms listed at the Nairobi Securities Exchange, Kenya. The study established that quick ratio has significant effect on financial performance of the Agricultural firms listed at the Nairobi Securities Exchange, Kenya. The study further recommends that holding of quick assets should be done with caution by firms. Holding of quick assets should be done in view of underlying short-term liabilities since excessive levels lead to declining financial performance. Keywords: Quick Ratio, Financial Performance, Trade-Off Theory and Dividend Signaling Theory

Effect of Cash Ratio on Financial Performance of Agricultural Firms Listed at the Nairobi Securities Exchange, Kenya

The study was informed by the continuous decline in financial performance of the agricultural firms listed at the Nairobi Securities Exchange, Kenya. The study emanates from the Doctoral dissertation of the first author in which the co-authors served as supervisors. A census approach was adopted where secondary data from audited annual financial reports of all the six Agricultural firms listed at the Nairobi Securities exchange, Kenya was used, covering the period 2015 to 2022. Descriptive analysis and panel regression analysis were applied. Based on the outcome of the panel regression analysis, the study established that cash ratio has significant effect on financial performance of the Agricultural firms listed at the Nairobi Securities Exchange, Kenya. The study recommends that agricultural firms listed at the Nairobi Securities Exchange need to improve on their cash and cash equivalents holdings so as to easily address current liabilities when due. This will in turn sustain the financial performance of agricultural firms listed at the Nairobi Securities Exchange, Kenya. Additional research can be done using a different method of analysis to further investigate the relationship between cash ratio and financial performance of agricultural firms listed at the Nairobi Securities Exchange, Kenya. Keywords: Agricultural Firms, Cash Ratio, Financial Performance, Liquidity Preference Theory and Stewardship Theory

Corporate social responsibility and sustainable development goals: evidence from responsible business leaders

PurposeThis study aims to provide a framework aligning corporate social responsibility (CSR) initiatives with sustainable development goals (SDGs) 2030, applying the triple bottom line (TBL) approach. The research examines and evaluates the reach of Maharatna Central Public Sector Enterprises’ (CPSE) CSR spending towards sustainability and maps them with SDGs focusing on economic, social and environmental aspects. In addition, state-wise spending for CSR of all eligible Indian companies has been discussed.Design/methodology/approachThe study used secondary data related to CSR spending and disclosure from the annual reports and sustainability reports accessible on the official websites of CPSE, Global Reporting Initiative standards, CSR Guidelines of Department of Public Enterprises and Securities Exchange Board of India, Government of India’s National Guidelines on Responsible Business Conduct (NGRBC) (2018) research papers, financial dailies and websites. The study includes the CPSEs awarded with the status of Maharatna companies under the Guidelines of Maharatna Scheme for CPSEs.FindingsThe top CSR initiatives focused on by Maharatna companies were related to poverty, hunger, sanitation and well-being, promotion of education and contribution to the Prime Minister’s National Relief Fund. These initiatives aligned with the top SDGs related to life on land, education and health care, which proved responsible business leadership (RBL) through TBL. The alignment indicates that India is moving towards sustainable development achievements systematically.Practical implicationsThe practical consequences can be understood through the CSR spending of Maharatna Public Sector Undertakings towards economic, social and environmental aspects. The spending demonstrates their commitment, which other public and private sector organizations can adopt.Social implicationsThe Government of India’s NGRBC’s guidelines towards inclusive growth and equitable development, addressing environmental concerns, and being responsive to all its stakeholders is a thorough indication of driving the business towards being more responsible. This research has developed a framework aligning CSR and SDG through the TBL approach, which other developing countries can adopt as a model.Originality/valueThere is dearth of research among public sector company’s contribution towards attaining SDGs and demonstrating RBL. This research fulfils this gap. Mapping CSR activities to SDG’s also has not been clearly carried out in previous research, which is a contribution of this study.

Impact of accrual and real earnings management on the stock liquidity: the month-of-the-year and Ramadan effects

Purpose The abnormality of the month-of-the-year and Ramadan effects has extensively existed in the stock and other markets. The commercial strategy pattern and the computation of such predictable patterns in the market allow investors to make money. By using anomalies such as the month-of-the-year and the Ramadan effects on earnings management (EM), it is possible to achieve such a goal. This study aims to investigate the month-of-the-year effect and the Ramadan effect on the relationship between accrual earnings management and real earnings management (AEM and REM, respectively) and liquidity in the Iranian capital market. Design/methodology/approach This empirical analysis comprises a panel data set of 80 listed firms (400 observations) on the Tehran Stock Exchange from 2016 to 2020. Findings The findings exhibit that when AEM and REM increase, information asymmetry also increases. The simultaneous increase of these variables leads to a decrease in stock liquidity. Furthermore, the results indicate that the month-of-the-year and Ramadan effects intensify the negative relationship between AEM and REM with stock liquidity. Therefore, EM is affected by the investor’s behavior in specific months. Practical implications Anomalies caused by the Ramadan effect and the month-of-the-year effect on reducing liquidity in the Iranian stock market were confirmed. Investors can use these anomalies to identify predictable patterns, exchange securities according to those patterns and earn abnormal returns. Originality/value To the best of the authors’ knowledge, this is the first study that empirically examined the simultaneous effect of Gregorian and Islamic calendar anomalies on the relationship between EM and liquidity, and while helping managers and other readers, it can be the basis for future research.

Corporate name change: the effect of the firm’s shareholder distribution

ABSTRACT This study explores the effect of corporate ownership structure on firm performance resulting from a firm’s strategic decision of corporate name change. First, the study uses the separation of ownership and control to capture the corporate ownership structure using a new shareholder distribution metric. Second, the study empirically estimates the main and interaction effects of shareholder distribution on a firm’s performance resulting from its corporate name change using data from the Australian Securities Exchange from 2017 to 2022, during which 457 unique firms changed their corporate names. The study finds shareholding distribution has contrasting effects on firm performance due to the corporate name change. The positive impact of shareholder distribution on a firm’s abnormal returns is attenuated due to the corporate name change. Thus, while a manager-controlled firm, characterized by its larger shareholder distribution, reaps more benefits, such benefits are reduced when it makes strategic decisions, such as corporate name change. The study attributes such reduction in firm benefit to owner-manager conflict emanating from a firm’s dispersed corporate ownership structure.

Conservation and sanitation of tropical genetic resources: a challenge for food security and germplasms exchange

Conservation and sanitation of tropical genetic resources: a challenge for food security and germplasms exchange

EFFECTS OF CAPITAL STRUCTURE ON AGENCY COSTS IN COMMERCIAL AND SERVICES COMPANIES LISTED AT THE NAIROBI SECURITIES EXCHANGE IN KENYA

<p>Academic and business research has focused on the competing interests of shareholders and managers, as well as the resulting agency fees. It is well known that managers have a strong desire to advance their own interests, such as their pay, the size of their companies, and the value of their securities. According to agency theory, shareholders will pay agency costs in order to reduce these conflicts. According to the free cash flow principle, when a company creates considerable free cash flow, there are significant agency conflicts between stockholders and executives. A number of empirical studies have proposed solutions to this problem, one of which is the use of a capital structure. Numerous studies on the effect of capital structures on agency costs have been conducted, with varying degrees of success. However, the majority of these studies took place in industrialized nations. The primary goal of this study, which lasted from 2012 to 2018, was to determine how capital configuration affected agency expenses in Kenyan commercial and service firms that were listed on the Nairobi Securities Exchange. The study's specific goals included investigating the effects of equity on agency costs, retained earnings on agency costs, long-term debt on agency costs, and firm size as a moderator of the effects of investment configuration on agency costs. A descriptive research method was used in this study to provide a thorough examination of the relationship between capital structure and agency costs. To collect the required seven-year panel data from the entire population of firms, the Nairobi Securities Exchange, the Capital Market Authority's data banks, and the firms' websites were used. These data were then examined at two levels of statistics: descriptive statistics and inferential statistics. In Kenyan commercial and service firms, variations in equity capital, retained earnings, and long-term debts jointly accounted for 65.9% of the variations in agency costs, according to the regression results.</p><p><strong>JEL:</strong> E22; G31; L10</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0075/a.php" alt="Hit counter" /></p>

Developments in trust law in India through the SEBI lens

Abstract Although the Indian Trust Act is an 1882 act which has not seen any change since its enactment, the law on the subject has evolved over time with changes in other laws/regulations. The article analyses the Indian securities/capital market regulator’s Securities Exchange Board of India (SEBI) perspective on the transfer of promoter shareholdings of a listed entity into private trust structures. The article discusses and examines SEBI regulations, circulars and orders to understand the contours of structuring an SEBI-compliant private trust. It also explores and analyzes SEBI’s thought process and the requirements that a structure must ensure in order to qualify for exemption.

Corporate tax avoidance: Is South African society negatively affected by chartered accountant CEOs?

Corporate tax avoidance can impede governments’ spending towards social and economic initiatives that can increase infrastructure development, economic growth, and equality, and reduce poverty. Yet, why some companies avoid more tax than others is not adequately understood, and, in particular, research regarding the influence of CEO-characteristics on tax avoidance, is lacking. This study is an empirical investigation into the influence of a CEO’s tax knowledge and tax awareness, construed as a ‘CEO effect’, on corporate tax avoidance, using data from the 112 largest listed companies on the Johannesburg Securities Exchange between 2004 and 2018. We found that the CEO effect, not measured before, does not have an observable influence on the level of corporate tax avoidance. This finding assuages possible concerns that chartered accountants, and particularly chartered accountants in the top leadership positions in large companies, are more shareholder oriented, to the detriment of the interests of society, as suggested in the literature. Significance: Our findings suggest less influence of the CEO, as an upper-echelon member, on companies’ behaviour, such as corporate tax avoidance, than other published studies have found. Moreover, the findings indicate that the tax knowledge and awareness construed as a CEO effect, does not influence corporate tax avoidance. In the main, the results provide little support for claims made by the South African Institute of Chartered Accountants, the chartered accountant’s regulatory body, that chartered accountants can help companies to avoid tax to increase profits. This may sway society’s view of the chartered accountant and their role in the South African economy.

Does CEO narcissism matter? An examination of the relationship between board structure and earnings management in Kenya

PurposeThis paper examines how board structure influences real earnings management and the interaction effect of CEO narcissism on board structure-real earnings management relationship.Design/methodology/approachThe authors used panel data derived from secondary sources from publicly listed firms in Kenya during 2002–2017. Hierarchical regression analysis was used to test the hypotheses.FindingsThe results indicate that board independence, board tenure and size have significant negative effect on real earnings management, while CEO duality positively affects real earnings management. Further, the interaction results show that CEO narcissism moderates the relationship between CEO duality and real earnings management.Research limitations/implicationsThe results suggest that real earnings management reduces when boards are independent, large and comprising of long-tenured members. However, when the CEO plays dual role of a chairman, real earnings management increases. The authors also find that when CEOs are narcissists, the monitoring role of the board is compromised.Originality/valueThe study adds value to the understanding of how board structure and CEO narcissism influence the monitoring role of the board among firms listed at Nairobi Securities Exchange.

Bank Characteristics and Financial Performance of Commercial Banks Listed at The Nairobi Securities Exchange in Kenya

Commercial banks in Kenya have recently experienced a steady downturn in their financial performance, mostly as a result of strict regulatory requirements and a changing business environment. The subpar financial performance of numerous lower-tier banks has resulted in significant consequences, including the necessity of placing some of these banks under receivership. The purpose of this study was to look into how various factors influence the financial performance of commercial banks listed on the Nairobi Securities market. In particular, this study looked to see how financial performance was impacted by asset quality and liquidity management. The study employed a descriptive methodology and a target population comprised of 11 commercial banks listed on the NSE were included in the population sample for this study. Secondary data was collected and analyzed using descriptive and inferential statistics. The research exhibited that the financial performance of commercial banks is significantly influenced by quality of their assets. Furthermore, the study revealed a positive and statistically significant impact of liquidity on the financial performance of Kenyan commercial banks The study concluded that financial performance was substantially and positively impacted by the quality of assets and liquidity management practices. Consequently, it is recommended that banks maintain a low level of nonperforming loans, as these loans have adverse effects on bank profitability, which in turn affects overall financial performance. Although the statutory ratio is established at 20%, the central bank might think about increasing this ratio by taking into account the general growth of the banking industry in recent years.

Macroeconomic Factors, Corporate Governance, Assets Structure, And Firm Value: Nairobi Securities Exchange Kenya

The study investigated the moderating effect of macroeconomic factors on the relationship between corporate governance, asset structure, and the value of firms listed at the Nairobi Securities Exchange in Kenya and set within the broader context of global financial markets, where the value of listed firms has declined despite their significant presence, with over 41,000 firms valued at USD 80 trillion. The study used a causal-comparative research methodology, relying on secondary data collected from listed firms on the Nairobi Securities Exchange from 2010 to 2019. Panel data analysis and multiple linear regression were the main methods employed to analyze the data. The study results indicate that macroeconomic factors do not appear to moderate the relationship between corporate governance practices and firm value. However, it is noted that the interaction between asset structure and macroeconomic factors was significant. The paper found that macroeconomic factors do not moderate the relationship between corporate governance and the value of firms listed at the Nairobi Securities Exchange. However, they do have a moderating effect on the relationship between asset structure and firm value in this specific context

Gastrointestinal helminths in tilapia (<i>Oreochromis niloticus</i>) sold for human consumption in Maiduguri, Nigeria: A potential public health risk

Fish is an important and cheap protein source for human consumption in developing countries. It is the second most popular source of protein diet in both rural and urban communities in Nigeria. Fisheries resources contribute about 5.40% to the nation's gross domestic product (GDP) through income generation, employment, food security, and foreign exchange earnings. Despite the significant contributions of fisheries to the Nigerian economy, the aquatic ecosystem is prone to pollution from human activities which increases the chances of transmission of parasitic infections, which are detrimental to aquatic and human life. The present study assessed the prevalence of gastrointestinal helminths of tilapia fish from different market sources in the Maiduguri metropolitan council of Borno State, Northeastern Nigeria. Samples of fresh Nile tilapia (Oreochromis niloticus) fish (n= 125), comprising 50 juveniles and 75 adults, were screened for gastrointestinal helminths using standard parasitological methods. Twenty-nine (23.2%) harboured at least one helminth parasite. Of the 29 positive individual fish samples, 16% (n=20), 4% (n=5), 2.4% (n=3), and 0.8% (n=1) were infected by Acanthocephala, Cestode, Nematode, and Trematodes, respectively. The infection rate was higher in adults (26%) than juveniles (18%) and in females (23.5%) than males (22.8%). Fish samples from Baga markets showed higher infection rates than the other two market sources. Sex, age, and location were not significantly associated with parasite recovery rate (p>0.05). The study concluded that Nile tilapia fish sold in Maiduguri metropolis were infected with different groups of helminths, underscoring public health risks to farmers, sellers, and consumers. Therefore, fish farmers should regularly consult veterinarians for advice on good fish management practices and observe proper hygienic handling of harvested fish at the farm level, during transportation to fish markets, and processing. The public should thoroughly clean and properly cook fish for human consumption.

Exploring the Accounting Treatment of Exploration and Evaluation Activities in the Extraction Industry in South Africa and Australia

The study examines the accounting treatment of exploration and evaluation assets in the extraction industry in South Africa and Australia. This study adopted a qualitative research approach and purposive sampling techniques. Data was collected from 60 entities in the extraction industry that are listed on the Johannesburg Stock Exchange (JSE) and the Australian Securities Exchange (ASX). The study found that South African entities classify exploration and evaluation assets as tangible or intangible assets using International Financial Reporting Standard (IFRS) 6. The study also observed that Australian entities classify exploration and evaluation assets as a separate class of assets using the Australian Accounting Standard Board (AASB) 6. South African entities depreciated or amortized exploration and evaluation assets, while Australian entities did not. The study concluded that even though there is high adoption of IFRS 6 or AASB 6, comparability is compromised in the extraction industry. The study recommended that IFRS 6 not offer a choice between IAS 16 or IAS 38 for the classification of exploration and evaluation assets to improve comparability and aid effective decision-making.

Effect of Firm Size on Short Term Debt of Firms Listed on the Nairobi Securities Exchange, Kenya

The capacity of a firm, the diversity and number of production capabilities, or the quantity and multiplicity of services a firm may simultaneously give to its consumers can all be considered as part of the firm's size. Short-term obligations should be used to fund short-term assets. The study evaluated the effect of firm size on short term debt on companies listed on Nairobi securities exchange. The study was anchored on agency theory and the growth firm theory. The study utilized descriptive research design. The study used secondary data from annual accounting report of quoted firms on Nairobi securities exchange. Data analysis was performed in order to convert obtained data into a format that can be used for interpretation and conclusion, therefore analysis was based on panel data, the analysis was based on panel regression. Result demonstrated a negative and significant effect between firm size and short term debt. The study recommends that management of firms’ especially larger firms should access long term financing which can be more long term investment which can enhance firms’ growth and competitiveness and smaller firms should not rely on short term debt.

Strategic Procurement Practices and Performance of Investment Firms Listed in Nairobi Securities Exchange, Kenya

The overall goal of the proposed study was to lay out the impact of key obtainment rehearses on acquisition execution of venture companies recorded in the NSE, Kenya. The specific objectives were to investigate how investment firms listed on the NSE’s procurement performance is affected by strategic supplier relationship practice; to determine how strategic contract management practices affect investment firms listed on the NSE procurement performance; To determine the impact of strategic sourcing on the procurement performance of NSE-listed investment firms in Kenya and; to ascertain how the practice of strategic negotiation affects investment procurement performance firms listed in the NSE, Kenya. This research problem was studied through the use of a cross-sectional research design. The units of observation constituted the 104 top and middle management staff working in the offices of investment firms listed in the NSE. This study used Yamane’s method to understand the sample size. Following this sample determination formula, the calculation generated a sample of 83 respondents from which the study sought information from. This study utilized both primary and secondary data sources. Primary data was gathered using research questionnaire as the research instrument. To complement the primary data, secondary data collection sheet was employed in collecting the secondary data from audited reports of the Company, NSE and other reliable sources. The researcher dropped the questionnaires physically through face-to-face method requesting them to fill them promptly and pick them up once filled up. The structured questions were used in an effort to conserve time and money as well as to facilitate in easier analysis as they are in immediate usable form; while the unstructured questions were used so as to encourage the respondent to give an in-depth and felt response without feeling held back in revealing of any information. Before processing the responses, the completed questionnaires were edited for completeness and consistency. The raw primary data collected was coded prior to being input into SPSS statistical analysis software. Once coded, the data was then cleaned to ensure accuracy and completeness of the information obtained. The data collected was both quantitative and qualitative and it was analyzed descriptively and inferentially. In addition, correlation analysis was conducted to the indicated the nature (positive or negative) and significance of the relationships between the variables in the study. Regression analysis was used to test the direction and magnitude of the relationship between the study variables. The study found that strategic supplier relationship affects procurement performance of investment firms listed in the NSE to a great extent. Utilization of strategic contract management practice was found to affect the procurement performance of the investment firms to a great extent. The study found that strategic sourcing practice affects the procurement performance of investment firms to a great extent. Strategic negotiation practice affects procurement performance to a moderate extent.It is imperative that Investment firms listed in the NSE reviews their existing procurement systems in order to identify the weak points and fasten them. Investment firms listed in the NSE should adopt customer orientation and then implement customer integration in order to receive a high level of procurement performance. Investment firms listed in the NSE should try as much as possible to tailor make their processes to best suit their unique needs.

Sustainability reporting, board diversity, earnings management and financial statements readability: evidence from an emerging economy

PurposeThis paper aims to investigate the moderating effect of sustainability reporting on the relationship between the independent variables of board diversity, and earnings management and the dependent variable of readability of financial statements.Design/methodology/approachThe study panel data regression analysis involved 36 Kenyan-listed companies from 2016 to 2020.FindingsKey findings were that increased board diversity was found to significantly improve the readability of financial statements. Discretionary earnings management was found to significantly reduce the readability of financial statements. Sustainability reporting was found to significantly increase the readability of financial statements, and it moderated the relationship between board diversity, earnings management and financial statements readability in Kenya.Research limitations/implicationsThe study sample of 36 non-financial listed in the Nairobi Securities Exchange was very small and was affected by the problem of thin trading; hence, caution should be adopted when interpreting the findings.Practical implicationsThe Capital Markets Authorities (CMA) as a policymaker should enforce sustainability reporting by Kenyan listed firms as there is evidence that the reporting enhances the readability of financial statements. The Institute of Certified Public Accountants as a policymaker should closely monitor the published financial statements of firms for earnings management and punish the perpetrators, as there is empirical evidence that the practice reduces the readability of financial statements.Social implicationsSustainability reporting is successful as a moderating variable between readability of financial statements and determinants of readability of financial statements.Originality/valueThis study contributes to knowledge by studying sustainability reporting as a moderating variable between the independent variables of board diversity and earnings management and the dependent variable of readability of financial statements and measured sustainability reporting using a dummy variable for the period before and after the enactment and release of CMA code of 2016 on corporate governance that required sustainability reporting by Kenyan listed companies.

Saving the environment with indigenous directors: Evidence from Africa

AbstractWe build on and extend the literature on corporate governance and sustainability by examining whether indigenous directors (IDs, hereinafter) shape corporate environmental performance (CEP, hereinafter). Drawing insights from image motivation, resource dependence, and critical mass theories, we develop models that link IDs with CEP. Analyzing 1,372 firm‐year observations extracted from firms listed on the Johannesburg Securities Exchange (JSE, hereinafter), for the period spanning from 2015 to 2021, we provide robust evidence that IDs are positively associated with a firm's environmental performance and the association is driven primarily by non‐executive and female IDs. In additional analyses, we demonstrate that a token appointment of IDs to a firm's board would not have an impact on CEP, while the appointment of a “critical mass” of IDs promotes CEP. We also find that a higher percentage of IDs on a firm's board increases corporate financial performance (CFP, hereinafter) and reinforces the positive impact of CEP on CFP. Our findings suggest that appointing a higher proportion of IDs to a firm's board promotes both the financial as well as the environmental performance of the firm. Thus, companies could exploit the virtues of especially non‐executive and female IDs to promote corporate environmental sustainability.

Audit partners’ gender and time variances of key audit matters

PurposeThis study aims to examine whether audit partners’ gender affects the year-to-year changes (year-to-year additions and drops) of key audit matters (KAMs) identified in the audit report. This study also examines whether female audit partners’ audit experiences, accounting education and narcissism reduce the difference in time variances of KAMs reporting between female and male audit partners. This study defines the year-to-year additions and drops of KAMs as the time variance of KAMs.Design/methodology/approachData of this study includes the audit reports of Australian Securities Exchange 300 companies for the period from 2017 to 2021. This study also applies the theory of female auditors’ preference for anchoring and availability heuristics. This study uses multivariate regression with robust standard errors clustered by the firms. This study also uses several robustness tests.FindingsThe findings suggest that female audit partners disclose fewer time variant KAMs in that they have a lower tendency both to add new KAMs and to drop old KAMs. Further analysis suggests that the differences between female and male audit partners decrease as the female audit partners’ experience increases or if the female audit partner possesses a bachelor’s degree in accounting. Female audit partners’ narcissism also reduces the gender gap in the time variances of KAMs.Practical implicationsThe fact that female audit partners report more stable KAMs implies that there are differences between female and male audit partners in the way audit risk assessments are conducted, audits are planned and professional judgement is applied by female and male audit partners.Social implicationsThe findings imply that female audit partners’ experience, accounting education and narcissistic personality can play a significant role in explaining the differences in audit outcomes produced by male and female audit partners.Originality/valueThis study is novel in showing that female audit partners report more stable and less time-variant KAMs. The findings of this study may inform audit firms and regulators that female audit partners’ experience, tertiary qualifications in accounting and narcissistic personality traits may be effective means of reducing the gender gap in auditing. The findings also imply that auditors’ observable and unobservable personality traits affect audit outcomes.

Effect of Risk on Total Debt of Companies Listed on the Nairobi Securities Exchange, Kenya

Despite the availability issue, debt financing continues to be an essential form of funding for businesses. Risks have been a major source of uneasiness for owners, executives, experts, as well as shareholders globally. The Kenyan enterprises have a greater susceptible to variations in currency rates in the nation’s economic climate, which is growing to become increasingly open with an increase in global trade. The study objective is to investigate the effect of risk on total debt of companies listed on Nairobi Securities Exchange. The study was underpinned by tradeoff theory and pecking order theory. The study utilized causal research design. Secondary data was used to collect data from yearly accounting statement from 2007-2011. Panel regression was used to analyze the fixed effect model. The result showed that risk negatively and substantially affects total debt. The study recommended that the management of listed firms should understand the tradeoff theory and pecking order theory. The study also recommended that risk should continually be monitored by companies to be in line with the prevailing economic conditions. This can be ensured by studying other factors trend that can affect the risk of companies.