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DETERMINANTS OF CORPORATE HEDGING PRACTICES USED BY COMPANIES LISTED IN NAIROBI SECURITY EXCHANGE: A CASE OF UCHUMI SUPERMARKET
 
Andrew Kintu
MBA, School of Human Resource Development, Jomo Kenyatta University of Agriculture and Technology

Dr. Patrick Karanja Ngugi
School of Human Resource Development, Jomo Kenyatta University of Agriculture and Technology

 
ABSTRACT

Hedging can reduce underinvestment costs since it reduces the probability of financial distress by shielding future stream of cash flows from the changes in the exchange rates. Variability in cash flows will result in variability in the amount of investment. A decrease in planned investment means that the firm is foregoing positive net present value projects and since it has insufficient internal funds the firm is forced to raise costly external finance. The study targeted a population of 300 management employees working at Uchumi Supermarket. Regression models were used to examine how long term debt ratio, growth option, liquidity ratio and cash flow volatility influenced hedging practices used by companies listed in Nairobi Securities Exchange. Questionnaires were used as the main data collection. Descriptive statistics and inferential data analysis method was to analyze the gathered data. The findings indicated that long term debt ratio, growth option, liquidity ratio and cash flow volatility influenced hedging practices used by companies listed in Nairobi Securities Exchange.


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