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Operational Risk, Bank Size and the Financial Performance of Commercial Banks in Kenya

Author

Listed:
  • Jane Gathigia Muriithi

    (School of Businessand Economics, Africa International University, Kenya)

  • Kennedy Munyua Waweru

    (School of Business and Economics,The Co-operative University of Kenya, Kenya)

Abstract

Operational risk threatens banks financial viability and long-term sustainability. The purpose of thispaperis to explorethe effect of operational risk on financial performance of commercial banks in Kenya.The qualitative research design and ordered logistic model were employed. The data was analysed with the aid of STATA software.The conclusion of the study was that there exists an inverse relationship between operational risk and financial performance.The studyalso finds that bank size moderates the effect internal and external fraud on financial performance of commercial banks in Kenya by shrinking it. Bank size moderates the effect execution, delivery and process management on financial performance of commercial banks in Kenya by enhancing it.Commercial banks’ management should adhere to the guidelines and procedures provided by the Central bank of Kenyaon operational risk management.

Suggested Citation

  • Jane Gathigia Muriithi & Kennedy Munyua Waweru, 2017. "Operational Risk, Bank Size and the Financial Performance of Commercial Banks in Kenya," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(3), pages 39-50, April.
    • Handle: RePEc:rbs:ijfbss:v:6:y:2017:i:3:p:39-50
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    References listed on IDEAS

    as
    1. Andersen, L.B. & Häger, D. & Maberg, S. & Næss, M.B. & Tungland, M., 2012. "The financial crisis in an operational risk management context—A review of causes and influencing factors," Reliability Engineering and System Safety, Elsevier, vol. 105(C), pages 3-12.
    2. Grant Kirkpatrick, 2009. "The corporate governance lessons from the financial crisis," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2009(1), pages 61-87.
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    Cited by:

    1. Olajide Solomon Fadun & Diekolola Oye, 2020. "Impacts of Operational Risk Management on Financial Performance:A Case of Commercial Banks in Nigeria," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(1), pages 22-35, January.
    2. Kah Chon, Ooi, 2019. "Impacts Of Firm-Specific Factors And Macroeconomic Factors Against Microsoft’S Performance," MPRA Paper 97254, University Library of Munich, Germany, revised 15 Nov 2019.
    3. narjess BOUABDALLAH & jamel Eddine HENCHIRI, 2020. "L' impact des mécanismes de gouvernance interne sur le risque opérationnel bancaire," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 11(1), pages 151-189, June.

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