Abstract:
Throughout history, society has always sought for ways and means of
responding to life challenges and opportunities. Several scholars support the
need for innovation for a firm to remain a good performer during its existence,
though the level of risks associated with this kind of undertaking has not
received the coveted attention. With the use of financial innovations
companies can safely utilize current or go for more risky and up to date
technologies that can have a drastic and positive impact on their ventures.
Additionally, financial innovations have had a tremendous impact in enriching
finance and enhancing the economic prosperity of many firms. However,
this financial innovation may also be ruinous to the organization if it is
overboard. This study thus sought to review the extant theoretical and
empirical literature relating to risky financial innovations, financial distress
and firm value. Specifically the study was guided by the following objectives:
To review extant theoretical literature on the constructs of risky financial
innovations, financial distress and firm value; to review past empirical
literature on the constructs of risky financial innovations, financial distress and
firm value; to identify the emerging theoretical and empirical gaps that form
the basis of future research. Additionally, the study sought to propose a
theoretical model to respond to the identified gaps. The study has concluded
that financial innovation has positive impact on financial performance and
firm value, there is direct relationship between financial innovation and
financial deepening and financial innovation enhances growth of the firm.
