EFFECT OF MANAGING FINANCIAL RISK ON THE FINANCIAL PERFORMANCE OF LISTED BANKS IN KENYA
DOI:
https://doi.org/10.47672/ajf.465Keywords:
Financial performance, credit risks, liquidity risk, interest rate risksAbstract
Purpose: Management of financial risk is a fundamental management task that commercial banks have incorporated to help shield the commercial banks from losses. However, listed commercial banks have, in recent times gone through challenging times from a performance perspective. This research assessed the correlation between financial results of commercial banks on Nairobi Stock Exchange from a perspective of managing financial risk.
Methodology: A descriptive research design was used along with quantitative research data by collecting panel data for the period 2009-2018 from annual supervision of banks reports along with audited accounts for the concerned entities. Accordingly, an analysis of collected data followed using SPSS 24, which employed descriptive analysis, correlation and regression testing.
Results: Results further indicate that credit risk results in (β) = -1.066; liquidity risk (β) = -.326 and interest rate risk (β) =.603 changes on the banks financial results. Research findings are expected to enhance policy and practice within the banking industry in Kenya.
Contribution of Study: To the regulator the study advocates for new guidelines to ensure that banks have better monitoring mechanisms to avoid breaching their capital reserve requirements. Listed banks should design more robust credit analysis policies and loan administration. This will allow the commercial banks to expand their lending activities to individuals and small businesses overcoming the challenges experienced due to the interest rate caps.
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Copyright (c) 2020 Lovemore Kamchira
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