Effect of Financial Risk on Financial Performance of Banks Listed at Nairobi Securities Exchange, Kenya

Rojena Batista Ukelo Ubul and Charles Katua Kithandi
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Rojena Batista Ukelo Ubul: Daystar University, Kenya
Charles Katua Kithandi: Daystar University, Kenya

African Journal of Commercial Studies, 2025, vol. 6, issue 5

Abstract: This study investigated the effect of financial risk on the financial performance of banks listed at the Nairobi Securities Exchange in Kenya. Anchored on agency theory, modern portfolio theory, and financial intermediation theory, the study used a descriptive and correlational research design. Secondary data covering the period 2018–2022 were collected from quarterly financial reports of listed banks. Multiple regression analysis was applied after diagnostic testing using SPSS. The findings revealed that liquidity risk and bank size have a positive and statistically significant influence on return on assets, while credit risk and market risk were statistically insignificant. Operational risk also showed no significant relationship with financial performance. The study recommends proactive liquidity risk management, improved credit risk monitoring, and investment in technology to enhance predictive analytics and operational efficiency in the banking sector.

Keywords: Financial Risks; Credit Risk; Liquidity Risk; Market Risk (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:ajocsk:2025-103

DOI: 10.59413/ajocs/v6.i5.10

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