IDEAS home Printed from https://ideas.repec.org/a/rbs/ijbrss/v10y2021i2p203-211.html
   My bibliography  Save this article

Effect of liquidity risk on the financial performance of deposit taking savings and credit cooperative organisations (SACCOs) in Kenya

Author

Listed:
  • Benjamin Otwoko

    (School of Business and Economics, Jomo Kenyatta University of Science and Technology, Juja Kwale, Rd, Juja, Nairobi, Kenya)

  • Kimani Maina

    (School of Business and Economics, Jomo Kenyatta University of Science and Technology, Juja Kwale, Rd, Juja, Nairobi, Kenya)

Abstract

Liquidity risk is the potential that an entity will be unable to acquire the cash required to meet its short and intermediate-term obligations. Deposit-taking Savings and Credit Cooperative Organisation (SACCOs) face liquidity risk when they are unable to fund their operations and lending requirements to their members as and when circumstances demand. Given that liquidity is a key phenomenon on the optimal functioning and financial performance of deposit-taking SACCOs, this study critically analyzed the effect of liquidity risk on the financial performance of DT SACCOs in Kenya. The study used a descriptive survey design and employed regression methods to model the relationship between liquidity risk and financial performance of DT SACCOs. The data were analyzed at a 5% level of significance. The study findings revealed that at a 5% level of significance, liquidity risk had a statistically significant influence on the financial performance of deposit-taking SACCOs. Basing on the findings, DT SACCOs are encouraged to focus on enhancing the mobilization of deposits to ensure that an asset portfolio that minimizes liquidity risk is maintained. Key Words: Liquidity Risk, Deposit Taking SACCOs, Fixed Effects, Financial Performance

Suggested Citation

  • Benjamin Otwoko & Kimani Maina, 2021. "Effect of liquidity risk on the financial performance of deposit taking savings and credit cooperative organisations (SACCOs) in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(2), pages 203-211, March.
    • Handle: RePEc:rbs:ijbrss:v:10:y:2021:i:2:p:203-211
    DOI: 10.20525/ijrbs.v10i2.1056
    as

    Download full text from publisher

    File URL: https://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/1056/819
    Download Restriction: no
    File URL: https://doi.org/10.20525/ijrbs.v10i2.1056
    Download Restriction: no
    File URL: https://libkey.io/10.20525/ijrbs.v10i2.1056?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gao, Huasheng & Harford, Jarrad & Li, Kai, 2013. "Determinants of corporate cash policy: Insights from private firms," Journal of Financial Economics, Elsevier, vol. 109(3), pages 623-639.
    2. Moses Ochieng Gweyi & John Karanja, 2014. "Effect of Financial Leverage on Financial Performance of Deposit Taking Savings and Credit Co-operative in Kenya," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 176-184, April.
    3. Guy L. F. Holburn & Bennet A. Zelner, 2010. "Political capabilities, policy risk, and international investment strategy: evidence from the global electric power generation industry," Strategic Management Journal, Wiley Blackwell, vol. 31(12), pages 1290-1315, December.
    4. Jane Gathigia Muriithi & Kennedy Munyua Waweru, 2017. "Liquidity Risk and Financial Performance of Commercial Banks in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(3), pages 256-265, March.
    5. King, Michael R., 2013. "The Basel III Net Stable Funding Ratio and bank net interest margins," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4144-4156.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Ting-Hsuan & Shen, Chung-Hua & Wu, Meng-Wen & Huang, Kuo-Jui, 2021. "Effect of shadow banking on the relation between capital and liquidity creation," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 166-184.
    2. Conti, Claudio Ramos & Parente, Ronaldo & de Vasconcelos, Flávio C., 2016. "When distance does not matter: Implications for Latin American multinationals," Journal of Business Research, Elsevier, vol. 69(6), pages 1980-1992.
    3. Sah, Nilesh B. & Adhikari, Hari P. & Krolikowski, Marcin W. & Malm, James & Nguyen, Thanh T., 2022. "CEO gender and risk aversion: Further evidence using the composition of firm’s cash," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    4. Jiménez, Alfredo & Salvaj, Erica & Lee, Jeoung Yul, 2018. "Policy risk, distance, and private participation projects in Latin America," Journal of Business Research, Elsevier, vol. 88(C), pages 123-131.
    5. Cheng, Louis T.W. & Leung, T.Y., 2016. "Government protection, political connection and management turnover in China," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 160-176.
    6. Smaoui, Houcem & Mimouni, Karim & Miniaoui, Héla & Temimi, Akram, 2020. "Funding liquidity risk and banks' risk-taking: Evidence from Islamic and conventional banks," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    7. Nathaniel Boso & Joseph Amankwah-Amoah & Dominic Essuman & Oluwaseun E. Olabode & Patience Bruce & Magnus Hultman & James Kofi Kutsoati & Ogechi Adeola, 2023. "Configuring political relationships to navigate host-country institutional complexity: Insights from Anglophone sub-Saharan Africa," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(6), pages 1055-1089, August.
    8. Ahmad, Muhammad Farooq & Kowalewski, Oskar, 2021. "Collective bargaining power and corporate cash policy," International Review of Law and Economics, Elsevier, vol. 68(C).
    9. Shon R. Hiatt & Jake B. Grandy & Brandon H. Lee, 2015. "Organizational Responses to Public and Private Politics: An Analysis of Climate Change Activists and U.S. Oil and Gas Firms," Organization Science, INFORMS, vol. 26(6), pages 1769-1786, December.
    10. French, Joseph J. & Fujitani, Ryosuke & Yasuda, Yukihiro, 2020. "Under pressure: Listing status and disinvestment in Japan," Finance Research Letters, Elsevier, vol. 34(C).
    11. Simon Schumacher & Stephan Paul, 2017. "Capital Markets Union – Promising Prospects for Corporate Financing?," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 18(3), pages 289-304, August.
    12. Dang, Van Dan, 2019. "Funding liquidity and bank lending: Evidence from Vietnam," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 15(2).
    13. Heitor Almeida & Murillo Campello & Igor Cunha & Michael S. Weisbach, 2014. "Corporate Liquidity Management: A Conceptual Framework and Survey," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 135-162, December.
    14. Elien Meuleman & Rudi Vander Vennet, 2022. "Macroprudential Policy, Monetary Policy, and Euro Zone Bank Risk," International Journal of Central Banking, International Journal of Central Banking, vol. 18(4), pages 1-52, October.
    15. Hadani, Michael & Doh, Jonathan P. & Schneider, Marguerite, 2019. "Social movements and corporate political activity: Managerial responses to socially oriented shareholder activism," Journal of Business Research, Elsevier, vol. 95(C), pages 156-170.
    16. White, George O. & Rajwani, Tazeeb & Krammer, Sorin M.S., 2022. "Legal distance and entrepreneurial orientation of foreign subsidiaries: Evidence from Southeast Asia," Journal of World Business, Elsevier, vol. 57(6).
    17. Takahashi, Hidenori & Yamada, Kazuo, 2015. "IPOs, growth, and the impact of relaxing listing requirements," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 505-519.
    18. Eskandari, Ruhollah & Zamanian, Morteza, 2022. "Cost of carry, financial constraints, and dynamics of corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 74(C).
    19. Thakur, Bhanu Pratap Singh & Kannadhasan, M., 2019. "Corruption and cash holdings: Evidence from emerging market economies," Emerging Markets Review, Elsevier, vol. 38(C), pages 1-17.
    20. Cuervo-Cazurra, Alvaro, 2016. "Multilatinas as sources of new research insights: The learning and escape drivers of international expansion," Journal of Business Research, Elsevier, vol. 69(6), pages 1963-1972.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbs:ijbrss:v:10:y:2021:i:2:p:203-211. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Umit Hacioglu (email available below). General contact details of provider: https://edirc.repec.org/data/ssbffea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.