Effect of risk management practices on the profitability of listed commercial banks in Kenya

Abstract

he primary objective of managing banks is to improve bank performance so as to maximize shareholders returns. This objective is met at the expense of increased risk which is not always accompanied with the high returns and hence may sometime lead to under performance. Risk management is essential to finding better performance because most banks are in risk business. The main objective of the study was to examine the effects of risk management practices on the profitability of listed commercial banks in Kenya. The specifics seek; to evaluate the effect of liquidity risk management on the profitability of listed commercial banks in Kenya. To determine the effect credit risk management on the profitability of listed commercial banks in Kenya.To find out the effect of operational risk management on the profitability of listed commercial banks in Kenya.The study was be guided by stakeholders’ theory, contingency theory and agency theory. Both descriptive and correlation design were used to achieve the study objective. Purpose sampling technique was used to select 8listed commercial banks in Nairobi Securities Exchange. Secondary panel data was collected from annual audited financial statements. Both descriptive and inferential statistics were used to analyze the data. Panel regression analysis was used to test the hypothesis of the study.