The Effects of Transactional Risk on Financial Performance of Nigerian Quoted Firms: An Expository Approach

Abstract

With high volatility and unpredictable nature of foreign exchange rates facing the world economy, there was need to find out how this affects businesses operating in Nigeria. Thus, the study aimed to examine the effect of foreign exchange risk on financial performance of Nigerian quoted firms. In determining this, the foreign exchange risk was first broken down into two translation risk and transaction risk, and financial performance was measured using Return on Asset of the firms. The study using the Taro Yameni model drew out a .sample of 1 1 9 firms out of the 169 firms listed on the Nigeria Stock Exchange market. The study adopted the regression model ROA 1 =? + TLRK + ? 2 TSRK. In order to achieve the objectives of the study, a regression analysis was carried out and the regression analysis showed that both translation and transaction risks have a significant relationship, this was subjected further to Correlation analysis to determine the effect of translation risk and transaction risk to return an asset, and the analysis revealed that translation risk and transaction risk are negatively correlated to firms' return on asset. The study recommends that training and retraining should be carried out in order to master foreign exchange management

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