Reviewed Journal of International Financial Management

IMPACT OF CAPITAL ADEQUACY, CREDIT RISK MANAGEMENT AND STAFF COMPETENCE ON BANK FAILURE IN KENYA (1993-2016)

JANE KAMITA, PhD — Fri, 27 Mar 2026 09:45:37 -0500

Bank failures pose a significant challenge to the stability of the financial sector and have profound implications for both the economy and regulatory authorities. In an attempt to address these challenges, this study focuses on the internal determinants of bank failure. Specifically, the research examines how three bank-specific factors, which include capital adequacy, credit concentration, and staff competencies, impacted bank failures in Kenya between 1993 and 2016. A mixed methods approach was employed, combining secondary data from the Central Bank of Kenya and from 24 failed banks through directed content analysis of published supervisory reports, with primary data collected through interviews with regulatory officials. Multiple regression analysis was used to evaluate the influence of the three variables on bank failure, measured by deviation from the 20 per cent regulatory liquidity threshold. The results indicated that capital adequacy had a statistically significant negative relationship with bank failure (β = −8.561, p = 0.036), showing that well-capitalised banks were less prone to collapse. In contrast, credit concentration had a positive and statistically significant effect (β = 15.318, p < 0.001), indicating that more concentrated loan portfolios were associated with greater failure severity. Staff competencies exhibited a negative but statistically insignificant effect (β = −6.264, p = 0.122); therefore, this variable did not show an independent stabilising impact in this analysis model. The study concludes that capital buffers and staff capabilities are critical in preventing institutional failure and recommends enhanced regulatory enforcement, capacity building, and targeted improvements in credit oversight to foster greater resilience in Kenya’s banking sector.

EFFICIENT PUBLIC FINANCIAL MANAGEMENT PRACTICES: KEY TO SUSTAINING DEVOLUTION IN KENYA

PAUL NDONYE, JOHN MUNGAI, PhD, SALOME MUSAU, PhD — Sat, 02 May 2026 22:57:26 -0500

Devolution in Kenya, established under the 2010 Constitution, is critical in local governance, economic development, service delivery, and grassroots community development. This necessitates optimizing revenue streams, rigorously controlling expenses, and prudently managing investments to maximize returns while minimizing risks. This research, therefore, investigated public financial management practices' impacts on the financial sustainability of Kenya’s Makueni County, specifically targeting financial planning, revenue mobilization, financial reporting, and financial controls. Agency and fiscal decentralization theories underpinned the study. Employing a positivist paradigm (philosophy) with an explanatory design, 118 respondents across various departments formed the target population. The study utilized both primary and secondary data, where the analysis was conducted via descriptive statistics and inferential analysis. The findings revealed that financial planning, revenue mobilization, and financial controls significantly enhance financial sustainability, while financial reporting alone has an insignificant direct effect. The study concludes that effective PFM practices are essential for achieving financial sustainability in devolved governments. sector.

AUDIT COMMITTEES AND THE UTILIZATION OF FINANCIAL RESOURCES IN COUNTY GOVERNMENTS IN KENYA

ABDIWAHID A. SHEIKH, OLUOCH J. OLUOCH, PhD, L NJOGU, PhD — Thu, 14 May 2026 21:59:51 -0500

The purpose of this study was to assess the effect of audit committees on the utilization of financial resources in county governments in Kenya. Specifically, the study determined the effect of audit committee composition, audit committee competences and experience, and audit committee meetings on the utilization of financial resources in these devolved units. A cross-sectional survey research design was adopted. The study targeted the 47 county governments in Kenya, where the units of observation were members of audit committees established by county executives and county directors of finance. Primary data was collected using a structured questionnaire. Both descriptive and inferential analysis were used to analyse the data. The study found that audit committee composition, audit committee competences and experience, and audit committee meetings had positive and significant individual and joint effects on the utilization of financial resources in county governments in Kenya. Consequently, the null hypotheses that these audit committee factors had no significant effect on utilization of financial resources were rejected. The study concluded that audit committees positively and significantly affected the utilization of financial resources in county governments in Kenya. The study recommended diverse audit committee membership, more women and independent directors, stronger policy frameworks, transparent appointment processes, qualified members, independent decision-making, adequate meeting duration, and alignment with county reporting and audit cycles.

FINANCIAL PLANNING AND VARIATION IN OWN-SOURCE REVENUE GROWTH IN TAITA TAVETA COUNTY, KENYA

EVA OIGO OMWEGA, JEREMIAH KOORI, PhD — Fri, 12 Jun 2026 20:00:18 -0500

Own-source revenue (OSR) is a critical source of fiscal sustainability for county governments because it supports service delivery, finances development programmes, and reduces dependence on intergovernmental transfers. However, despite improvements in revenue performance across Kenyan counties, substantial disparities in revenue growth and stability persist. Taita Taveta County has continued to experience fluctuations in own-source revenue performance characterized by inconsistencies in budget execution, expenditure control, and revenue realization, thereby affecting fiscal stability and service delivery. This study, therefore, examined the effect of financial planning on variation in own-source revenue growth in Taita Taveta County, Kenya. The study was anchored on Public Financial Management Theory and adopted a descriptive research design. Secondary data were obtained from official county financial records and reports covering the period 2013–2024. Data were analyzed using descriptive statistics, correlation analysis, regression analysis, and Granger causality tests with the aid of STATA software. The findings established that financial planning had a positive and statistically significant effect on variation in own-source revenue growth (β = 0.421, p < .001). Correlation analysis revealed a positive and statistically significant relationship between financial planning and variation in own-source revenue growth (r = 0.645, p < .01). Regression results further showed that financial planning explained 41.6% of the variation in own-source revenue growth (R² = 0.416). The descriptive findings revealed persistent weaknesses in budget execution, expenditure control, and budget forecasting accuracy, reflected through expenditure deviations, fiscal deficits, and revenue forecast variances. The study concludes that strengthening financial planning, particularly budget forecasting accuracy and expenditure control, is essential for improving fiscal discipline and promoting sustainable own-source revenue growth in Taita Taveta County. The study recommends strengthening budget execution systems, improving budget forecasting mechanisms, and enhancing expenditure monitoring processes to improve fiscal sustainability.

MANAGEMENT EFFICIENCY AND FINANCIAL STABILITY OF INSURANCE FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA

HARRISON KISANYA, KIMANI E. MAINA, PhD, BOSIRE J., PhD — Sat, 13 Jun 2026 06:34:22 -0500

The insurance industry plays a crucial role in fostering the ongoing growth and prosperity of the economy. The insurance sector is accountable for ensuring the ongoing survival of businesses, mitigating the risk associated with financial losses, and striving to eliminate uncertainty for investors. Despite their importance, recent statistics indicate that these firms have been having trouble maintaining their financial stability. Limited research exists on how management efficiency affects the financial stability of these firms. This study addressed this gap by analyzing the effect of management efficiency and the financial stability of insurance firms listed at the NSE, Kenya. The study was guided by the Resource-Based View Theory. A descriptive research design was adopted, with a target population of 6 insurance firms listed at the NSE, Kenya, as of December 2024, and the study was conducted through a census approach. Secondary panel data for the years between 2015 and 2024 were utilized to collect financial information from the insurance firms' records, IRAs, and NSEs. Data was gathered from secondary sources with the aid of a secondary data collection sheet and analyzed using descriptive and inferential statistics. The descriptive statistical tools included frequencies, percentages, means, variances, and standard deviations. Inferential statistical tools included Pearson’s Product-Moment correlation and panel regression analysis. The results of the model summary indicated an R² of 0.6106, implying that 61.06% of the variation in the financial stability of insurance firms listed at the NSE is explained by management efficiency. The regression results revealed that management efficiency exhibited a positive and significant effect (β = 0.3375, p = 0.0006), implying that higher operating costs increase leverage and weaken financial stability. Based on these findings, the study recommends that insurance firms should enhance operational efficiency. Regulators should also reinforce risk-based supervision and prudential guidelines to enhance the resilience and stability of the insurance sector in Kenya.

The EXCHANGE RATE RISK AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN KENYA

CHARLES KIURA NYAGA, ISAAC L. OCHIENG', PhD, CHARLES ROCHE, PhD — Mon, 15 Jun 2026 13:48:38 -0500

In Kenya's financial system, Deposit-Taking Savings and Credit Cooperative Societies (DT-Saccos), are of key importance because they offer their members essential financial services. This study looked at how DT-Saccos' financial performance is affected by exchange rate risk. The study is anchored on deflation theory. A sample of 122 DT-Saccos was chosen from the target population, which consisted of 175 DT-Saccos. The study made use of secondary data that was gathered using a data extraction tool from DT-Saccos's annual audited financial reports for the years 2020 to 2024. Panel multiple regression analysis was used to analyse the collected data with the help of SPSS Version 30. The findings revealed that DT-Saccos's financial performance in Kenya was significantly affected by exchange rate risk. Therefore, the study suggests that in order to reduce exchange rate risk, the government should implement appropriate fiscal and monetary policies nationwide. The DT-Saccos CEOs should employ mechanisms of identifying exchange rate risk to enable them to put necessary measures to mitigate them. This study contributes to the growing body of literature on financial risk management and provides actionable insights for DT-Sacco managers, and Stakeholders seeking to improve the sustainability and profitability of financial cooperatives in developing economies.

The MARKET RISK PREMIA AND STOCK RETURNS OF COMMERCIAL BANKS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA

SAMUEL WASICHE, E. M. KIMANI, PhD, DAVID KIMANI NDURUHU, PhD — Mon, 15 Jun 2026 13:54:54 -0500

Stock returns play a central role in capital allocation and investment decision-making by serving as a market-based indicator of the cost of equity capital for firms and investment projects. In an efficiently functioning stock market, return generation enables investors to assess risk accurately and translate it into expected compensation, thereby facilitating informed portfolio and financing decisions. However, in the Kenyan capital market, stock returns of commercial banks listed at the NSE have remained relatively volatile and, at times, subdued due to fluctuations in systematic market risk and changing macroeconomic conditions. These fluctuations have exposed investors to substantial valuation losses, especially during periods of foreign capital outflows, when international investors reallocate funds to perceived safer markets in developed economies. This study examined the effect of market risk premia on the stock returns of commercial banks listed at the NSE, Kenya. The study was supported by the capital asset pricing model (CAPM). The population of the study was drawn from the 11 commercial banks listed at the NSE in Kenya as of December 2025, and the study was conducted through a census approach. The study adopted a descriptive research design and utilized secondary panel data drawn from the NSE, CBK reports, and published financial statements of the listed commercial banks over ten years, from 2016 to 2025. Data was analyzed using a panel regression model, supported by descriptive statistics and diagnostic tests to ensure the validity and reliability of the estimated models. The findings revealed that the model had strong explanatory power with an R-squared of 0.6124, indicating that approximately 61.24% of the variation in stock returns is explained by the selected risk premia. The regression results showed that market risk premium (β = 0.4218, p < 0.01) was found to have a strong positive and significant effect on stock returns. The study concludes that market risk premia significantly influence stock returns of commercial banks listed at the NSE and that multi-factor asset pricing models provide a more comprehensive explanation of stock return behavior in the Kenyan context. The study recommends that investors are encouraged to adopt multi-factor investment strategies that consider market conditions, while bank management should focus on efficiency-driven growth to enhance shareholder value.

PUBLIC FINANCIAL MANAGEMENT PRACTICES AND REVENUE GROWTH OF NAIROBI CITY COUNTY, KENYA

ZAMZAM ALI IBRAHIM, SALOME MUSAU, PhD — Tue, 23 Jun 2026 19:51:40 -0500

Revenue growth remains a critical component in enhancing the capacity of county governments to finance public services, infrastructure development, and socio-economic transformation. Despite various public financial management reforms implemented by county governments in Kenya, many counties continue to experience challenges in meeting their revenue targets. Nairobi City County has particularly faced stagnation in revenue growth despite increasing demands for public services and urban infrastructure. Reports indicate that the county recorded only a marginal growth in revenue collection while tax compliance levels remain below expected standards. This study sought to examine the effect of public financial management practices on revenue growth of Nairobi City County, Kenya. Specifically, the study examined the effect of revenue mobilization practices, budgeting practices, financial reporting practices, and monitoring and evaluation practices on revenue growth. The study was anchored on New Public Management Theory, Resource-Based View Theory, Agency Theory, and Stewardship Theory. A descriptive research design was adopted. The target population comprised 486 employees from the Finance and Economic Planning Department of Nairobi City County Government. A stratified random sampling technique was used to select a sample of 146 respondents. Primary data were collected using semi-structured questionnaires, while secondary data were obtained using a data collection sheet. Quantitative data were analyzed using SPSS Version 20 through descriptive statistics, Pearson correlation analysis, and multiple regression analysis. The findings revealed that revenue mobilization practices had a positive and statistically significant effect on revenue growth (β = 0.184, p = 0.046). Budgeting practices had a positive and significant effect on revenue growth (β = 0.306, p = 0.004) and emerged as the strongest predictor of revenue growth. Financial reporting practices also positively and significantly influenced revenue growth (β = 0.300, p = 0.020), while monitoring and evaluation practices had a positive and statistically significant effect on revenue growth (β = 0.281, p = 0.007). The study concludes that effective public financial management practices significantly contribute to revenue growth in Nairobi City County. The study recommends strengthening revenue mobilization systems, institutionalizing performance-based budgeting, enhancing transparency in financial reporting, and improving monitoring and evaluation frameworks to promote sustainable revenue growth.

The REAL ESTATE INVESTMENT AND FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN KENYA

TERER D., ROCHE C., PhD — Tue, 30 Jun 2026 21:25:41 -0500

Purpose: Insurance firms play a critical role as institutional investors, allocating substantial resources as well as mobilizing contractual savings while simultaneously meeting long-term policyholder obligations under a regulated environment. Despite the growing adoption of investment diversification, empirical evidence on whether real estate investment enhances insurers’ financial performance in Kenya remains mixed and inconclusive. The study examined the effect of real estate investment on the financial performance of insurance companies in Kenya.

Methodology: The study adopted a descriptive research design and targeted all 55 insurance companies licensed and operating in Kenya, applying a census approach due to the manageable population size. Secondary panel data covering seven years (2019 – 2025) was obtained from IRA reports, audited financial statements, and relevant regulatory publications. Financial performance was measured using ROI. Data analysis was conducted using panel regression techniques, with random effects models estimated.

Findings: The findings revealed that the model had strong explanatory power with an R-squared of 0.6423, indicating that approximately 64.23% of the variation in financial performance is explained by real estate investment. The regression results showed real estate investments (β = 0.2684, p < 0.05) had positive and statistically significant effects on financial performance. The study concludes real estate investment significantly enhances the financial performance of insurance firms in Kenya; however, the average ROI remains below the recommended industry benchmark, indicating sub-optimal portfolio efficiency.

Reocommendations: Based on these findings, the study recommends that insurance firms should adopt optimal asset allocation strategies, increase exposure to high-performing asset classes such as real estate and strengthen portfolio management practices through continuous performance monitoring and rebalancing. Policymakers are also encouraged to review investment guidelines to provide greater flexibility for insurers while ensuring prudent risk management.

LIQUIDITY RISK MANAGEMENT AND FINANCIAL DISTRESS OF INSURANCE FIRMS LISTED AT NAIROBI SECURITY EXCHANGE, KENYA

ABDIRASHID B. M., KIMANI E. M., PhD, NDURUHU D. K., PhD — Sun, 12 Jul 2026 23:44:01 -0500

Financial distress continues to threaten the stability, solvency, operational continuity of insurance firms listed on the Nairobi Securities Exchange (NSE).Despite the critical role of these firms in risk mitigation, savings mobilization, and investment, there remains limited empirical evidence on how liquidity risk management contribute to their escalating financial distress. The objective of the study was to determine the influence of liquidity risk management on financial distress of insurance firms listed at Nairobi Security Exchange, Kenya. Guided by this objective, the study was anchored on the Liquidity Preference Theory.The study adopted a descriptive research design and targets all (6) six insurance firms listed at the NSE and applied a census approach due to the small and unique population. Secondary data covering a ten-year period (2016-2025) was collected using a secondary data collection sheet and extracted from audited financial statements and annual reports. The data was coded and analyzed using the Statistical Package for the Social Sciences (SPSS) version 25.0, employing descriptive statistics means, standard deviations, frequencies and inferential analysis including correlation and panel regression to determine relationships and effects among variables.The findings revealed that liquidity risk management had a negative and significant relationship with fianacial distress. Based on these findings, the study concluded that the effect accounted for 62.1% of the variation in financial distress of insurance firms listed at the NSE,Kenya.The findings revealedliquidity risk management had a significant negative effect on financial distress (β = -0.317, p < 0.05) on insurance firms listed at the NSE, Kenya.The study recommends insurance firms should adopt integrated risk-management frameworks that simultaneously address liquidity risk.

CREDIT RISK AND OPERATIONAL PERFORMANCE OF COMMERCIAL BANKS LISTED AT THE NAIROBI SECURITIES EXCHANGE IN KENYA

JACKSON OMAYIO NYANDEGE, KIMANI E. MAINA, PhD, PAUL TEIMET R., PhD — Tue, 14 Jul 2026 02:02:32 -0500

This study sought to investigate how credit risk affects the operational performance of commercial banks listed on the Nairobi Securities Exchange (NSE) of Kenya between the years 2015 and 2024. This research was prompted by the consistent high levels of Cost to Income Ratio (CIR) that have been recorded in the banking industry of Kenya above the global standards of 40-55% while also recording high levels of non-performing loans above 14%. Based on the Credit Rationing theory, the research used a descriptive research methodology using the census approach targeting all 11 commercial banks listed on NSE. Panel secondary data were collected from the audited annual financial statements and analysed using the Statistical Package for Social Sciences (SPSS 25.0). Descriptive statistics indicated that the average proportion of expenses from operations was 53.9% of the operating income, while the average value of credit risk was 11.4% with minimal variations throughout the analysed period. Trend analysis results show a non-linear trend in both studied variables including the presence of the disruptions associated with the period of the COVID-19 pandemic. The results of correlation analysis reveal a statistically significant relationship between credit risk and CIR (r = 0.388, p < 0.001). The results of panel regression analysis prove that the credit risk significantly affects CIR positively (β = 0.4358, t = 4.350, p = 0.000) and accounts for 15.05% of the operational efficiency variation (R² = 0.1505), whereas the whole model proves its significance (F = 19.124, p = 0.000). These results demonstrate that growing NPLs negatively impact operational efficiency of banks via the "double penalty" effect through increasing the cost of provisions and reducing interest income.