Financial Risk Attitude, Environmental Dynamism and Financial Sustainability of Small and Medium Enterprises in Nairobi, Kenya

The specific objectives were to establish the effect of financial risk attitude on financial sustainability and whether environmental dynamism moderates the relationship. The study was guided by the dual process theory. The study adopted explanatory research design. The sample size of 383 SMEs was drawn from a target population of 8947 SMEs located within Nairobi’s Central Business District using simple random and stratified sampling techniques. The main unit of analysis was the business owners of the SMEs. The quantitative data was collected using structured questionnaires and analyzed using both descriptive and inferential statistics. The study used hierarchical regression model to test hypotheses formulated. The results indicate that financial risk attitude had a positive and significant effect on financial sustainability. However, environmental dynamism significantly does not moderate the relationship between financial risk attitude and financial sustainability. The results underscore the pivotal role of financial risk attitude as key determinants shaping the financial sustainability of SMEs. The study recommends SMEs improve financial risk attitudes highlighting significant managerial, policy, and theoretical implications. For managers, proactive risk-taking and informed decision-making are crucial for navigating improving financial sustainability. Keywords: Financial Risk Attitude, Financial Sustainability, Environmental Dynamism, SMEs