Abstract:
This study aimed to investigate the impact of macroeconomic variables on the financial performance of manufacturing firms listed in the Dar Es Salaam Stock Exchange from 2013 – 2022. Specific objectives of this study were to ascertain the impact of interest rate, inflation rate and exchange rate on the financial performance of manufacturing firms listed on the DSE.The study utilized Trade-off Theory within a positivist philosophy and employed a quantitative research approach with a causal design. The population consisted of all manufacturing companies listed on the DSE, and a census sampling approach was implemented. Data was collected through comprehensive document reviews and analyzed using descriptive and inferential statistical techniques with the assistance of STATA 12 software. The results of this study unveiled negative correlation between interest rate and financial performance of the listed manufacturing firms. Also, findings of this study depicted that inflation have a positive effect on the financial performance of the listed manufacturing firms. This study indicated that that fluctuations in the exchange rate have a negative effect on the financial performance of the listed manufacturing firms. The study emphasizes the importance for manufacturing firms to closely monitor interest rate trends to formulate proactive financial strategies and adopt strong inflation risk management practices. Additionally, it recommends developing strategies to hedge against exchange rate fluctuations, particularly for firms engaged in international trade or those exposed to foreign currencies. A key suggestion for future research is to conduct sector-specific analyses within the manufacturing industry, focusing on sub-sectors such as electronics, food processing, or textiles. This approach can help identify the unique opportunities and challenges each sector faces concerning macroeconomic factors
