EFFECT OF OWNERSHIP STRUCTURE ON THE RELATIONSHIP BETWEEN RISK MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE OF FINANCIAL INSTITUTIONS IN KENYA

Abstract

Purpose: The purpose of the study was to determine the effects of ownership structure on the relationship between risk management practices and performance of financial institutions.Methodology: The study used explanatory research design. The study used stratified random sampling to select respondents from target population comprising of managers of 46 commercial banks, 52 Micro Finance institutions (MFIs) and 200 SACCOs and a sample size of 239 respondents obtained. Data was collected using questionnaires. Descriptive statistics was presented, while inferential statistics was done using Pearson product moment correlation.Results: The findings indicated that the risk management practices (identification, analysis, evaluation and monitoring) influence the performance of financial institutions.Unique contribution to theory, practice and policy: The study has established the importance of ownership structure as a system of corporate governance that significantly moderates the relationship between risk management practices and performance of financial institutions can exploit various risk management practices identification, analysis, evaluation and monitoring should be enhanced so as to bring efficiency in the performance of financial institutions. These may be achieved through establishment and implementation of risk identification, analysis, evaluation and monitoring policy framework which will significantly influence performance of financial institutions and enhance shareholder capabilities to identify, analyse, evaluate and monitor all risks that can hinder the financial institutions from achieving their set objectives.