Bank Size and Financial Risk Exposure on Financial Performance of Commercial Banks in Kenya
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Date
2019-09-13
Authors
Konya, M. Nelly
Jagongo, Ambrose
Kosimbei, George
Journal Title
Journal ISSN
Volume Title
Publisher
Sciedu Press
Abstract
The performance of banks in Kenya has become a major concern for economics and policy makers due to the role of
banks remaining central in financing economic activities. The study sought to establish the effect of bank size and
financial risk exposure on financial performance of commercial banks in Kenya. The descriptive research design and a
positivist approach were adopted. The Berger and Hannan approach was used to establish the relationship between
bank size, financial risk exposure and the moderating effect of macroeconomic variable on the financial performance
of commercial banks in Kenya. Various diagnostic tests were carried out and the study data structure was panel hence
Stata was employed to determine the relationship between the variables. In conclusion, banks need to grow bank sizes
where they enjoy both economies of scale and scope. The Kenyan Treasury should design policies that would increase
the capital size, liquidity requirements and deposit insurance premiums; this may assist in enlarging the size of banks to
a level where they are fairly equal with none having relative market power to drive the market. Areas of further
research may include but not limited to considering other variables besides the financial risk exposure and bank size in
determining their effect on the financial performance of commercial banks in Kenya. The research may as well be done
in the East African or African context. The further studies should seek to leverage on mixed research approaches that
utilize both quantitative and qualitative research.
Description
A Research Article in the International Journal of Financial Research
Keywords
Bank size, Financial risk exposure, Financial performance, Commercial banks, Berger and Hannan approach
Citation
Nelly, K. M., Ambrose, J., & George, K. (2019). Bank Size and Financial Risk Exposure on Financial Performance of Commercial Banks in Kenya. International Journal of Financial Research, 10(6), 250-264.