Effect of foreign exchange transaction risk management on financial performance of dominant flower firms in Timau Meru County, Kenya

Kenya's flower industry is a vital sector that contributes significantly to the nation's income generation through exports, but it has faced a gradual decline over the past five years, affecting its performance. Previous studies examining the impact of managing foreign exchange risk on company performance have identified several gaps that need to be addressed. Therefore, this current study aims to assess how the management of foreign exchange transaction risk affects the financial performance of dominant flower firms in Timau Meru County, Kenya. The research was guided by the Theory of Rational Expectations. The investigation sought to achieve its aims by utilizing an explanatory research approach, focusing on the leading flower enterprises in Timau for a duration of three years (2020 – 2022). Primary data was gathered through surveys comprising both open and closed-ended questions, while secondary data was collected via structured tables. The study targeted 158 managers from five well-known firms: P.J Dave Rising Sun Timau Farm, Batian Flowers, Upendo Flowers, Tambuzi, and Uhuru Flowers. This management group consisted of accountants, export managers, and operational managers, all of whom play a crucial role in the creation, selling, and exporting of their flower products. Given the relatively compact size of the study group, a complete census of all 158 participants was conducted. Upon data collection, SPSS software version 27 facilitated the extraction of descriptive statistics and the execution of multiple linear regression analyses to assess the research hypotheses. Descriptive statistics were used to calculate mean values and standard deviations, and multiple linear regression analysis was employed for hypothesis testing. Subsequently, the findings were compiled into summaries, reports, and frequency distribution tables. The analysis of multiple regression indicated that the R^2 value stood at 0.727, suggesting that the variables related to managing risks from foreign exchange accounted for 72.7% of the changes in the financial outcomes of the floriculture businesses in Timau Meru county. The research further indicated that effective handling of transaction risk associated with foreign currency significantly impacted the financial results of these businesses in Timau Meru County.