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All Journal International Journal of Accounting, Management, Economics and Social Sciences (IJAMESC)
Gordon Opuodho
Jomo Kenyatta University of Agriculture and Technology, Kenya
Humanities Economics, Econometrics & Finance Education Law, Crime, Criminology & Criminal Justice Social Sciences

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CREDIT RISK COMPLIANCE LEVELS AND TECHNICAL EFFICIENCY OF COMMERCIAL BANKS IN KENYA: A DATA ENVELOPMENT ANALYSIS (DEA) MODEL APPROACH Stephen Kisuli; Tabitha Nasieku; Gordon Opuodho; Kimanzi Kalundu
International Journal of Accounting, Management, Economics and Social Sciences (IJAMESC) Vol. 4 No. 2 (2026): April
Publisher : ZILLZELL MEDIA PRIMA

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.61990/ijamesc.v4i2.711

Abstract

This paper investigates how level of compliance with credit risk regulatory guidelines issued by the central bank of Kenya impacts on technical efficiency whilst considering bank size as a moderating variable. The study adopts a quantitative research design, where a panel data of ten years of a sample of all the licensed commercial banks in Kenya is applied. The technical efficiency scores are estimated with the help of Data Envelopment Analysis (DEA) and the correlation between compliance with credit risk and technical efficiency is estimated with the help of the two-limit Tobit regression model estimated by the means of the Maximum Likelihood Estimation (MLE) method. The study findings established that there is a negative and statistically significant correlation between credit risk and technical efficiency meaning that an increase in credit risk correlates with decreased technical efficiency among commercial banks. Bank size was found to be statistically significant in determining the impact of technical efficiency, which points to the role of scale-related variables in efficiency performance. The study suggests commercial banks to improve their credit risk management and the level of compliance with prudential credit risk guidelines to minimize excessive credit risk exposure and to promote technical efficiency. Moreover, regulators and policymakers are advised to take into account bank size in designing and implementing credit risk regulatory frameworks. The paper also recommends that future research should generalize the study to other financial institutions, including microfinance institutions and cooperative banks, and use longer time horizons to reflect changing regulatory and efficiency dynamics of the financial sector.
INTEREST RATE RISK AND THE FINANCIAL PERFORMANCE OF LISTED COMMERCIAL BANKS IN KENYA Mutinda Prisca Nthenya; Gordon Opuodho; Linus Isaac Ochieng
International Journal of Accounting, Management, Economics and Social Sciences (IJAMESC) Vol. 4 No. 2 (2026): April
Publisher : ZILLZELL MEDIA PRIMA

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.61990/ijamesc.v4i2.727

Abstract

This study examined the impact of interest rate risk on the financial performance of listed commercial banks in Kenya from 2013 to 2023. Using the Interest Rate Parity Theory, it employed a longitudinal approach and conducted a census of all 11 banks listed on the Nairobi Securities Exchange (NSE). These banks are subject to strict oversight by both the Capital Markets Authority (CMA) and the NSE, which require consistent disclosures, financial reporting, audits, and adherence to corporate governance standards. This regulatory environment fosters transparency in asset-liability management (ALM) and risk control, making these banks ideal for studying the relationship between interest rate risk and financial performance. The research utilized secondary data from annual financial statements and reports from the Central Bank of Kenya. Financial performance was measured using Return on Assets (ROA). Panel regression analysis revealed a positive association between interest rate risk management and financial performance, indicating that banks with stronger interest rate risk management tend to perform better. The findings suggest that Kenyan-listed banks have maintained consistent and effective interest rate risk management over the decade, thereby contributing to their stability amid economic uncertainty. Enhanced interest rate management further improved their resilience and financial outcomes. The study recommends that banks maintain robust hedging strategies, conduct regular interest rate stress tests, and perform scenario analyses to guard against unexpected interest rate fluctuations and promote sustainable growth.
OPERATING LEVERAGE AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN KENYA Obonyo Awuor Esther; Gordon Opuodho; Linus Isaac Ochieng
International Journal of Accounting, Management, Economics and Social Sciences (IJAMESC) Vol. 4 No. 2 (2026): April
Publisher : ZILLZELL MEDIA PRIMA

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.61990/ijamesc.v4i2.729

Abstract

Leverage is a critical determinant of financial performance in manufacturing firms due to the high proportion of fixed operating costs in capital-intensive production. In Kenya, listed manufacturing firms operate in a volatile environment characterized by fluctuating demand, cost uncertainty, and competitive pressures, making operating leverage a key strategic concern. While higher operating leverage can enhance profitability during periods of revenue growth, it may also increase earnings volatility and business risk during economic downturns. This study examines the effect of operating leverage on the financial performance of listed manufacturing firms in Kenya. A descriptive quantitative research design was adopted, guided by trade-off theory and operating leverage theory. The study employed a census approach, using secondary panel data from audited financial statements of firms listed on the Nairobi Securities Exchange over the period 2014–2023. Financial performance was measured using return on assets (ROA), while operating leverage was proxied by the degree of operating leverage (DOL). Panel regression analysis was conducted following diagnostic tests to ensure model robustness. The findings reveal that operating leverage has a positive and statistically significant effect on financial performance. Higher operating leverage improves profitability during periods of sales growth but also increases earnings volatility under declining demand. The study highlights the importance of optimizing cost structures and provides insights for managers, investors, and policymakers in enhancing firm resilience.
Co-Authors Kimanzi Kalundu Linus Isaac Ochieng Mutinda Prisca Nthenya Obonyo Awuor Esther Stephen Kisuli Tabitha Nasieku