RISK MANAGEMENT, FIRM CHARACTERISTICS, CORPORATE GOVERNANCEAND BANK PERFORMANCE: A CRITICAL LITERATURE REVIEW

Effective risk management is accepted as a major cornerstone of bank management byacademicians, practitioners and well as regulators. Acknowledging this reality and the need for acomprehensive approach to deal with bank risk management, the Basel Committee on BankingSupervision adopted the Base I Accords, followed by the Basel II Accords and more recently, theBasel III accords, to attempt to deal with the critical matter in the banking industry. This studyaims to undertake a critical theoretical literature review on risk management, firm characteristics,corporate governance and performance of commercial banks. The paper starts from thetheoretical and empirical proposition that the risk management, firm characteristics as well ascorporate governance effectively leads to improved bank performance. The paper argues that riskmanagement coupled with theexternal demands for efficiency in banks (external corporategovernance) translates to internal, organizational arrangements for performance management andincentive system design (internal governance), leads into better performance of banks. Further itproposes that firm characteristics such as ownership structure, size and financial architecture caninfluence the nature of the relationship among risk management, corporate governance and bankperformance.The most common firm characteristics being included as variables in corporategovernance or risk management researches arefirm size,leverage and industry type. Theinfluence of these firm characteristics on the relationship between risk management and firmperformance however is not well documented.The study presents a conceptual framework guidedby the following theories: enterprise risk management framework, agency theory, thestewardship theory, the stakeholder theory. The study concludes by identifying and discussingthe knowledge gaps and documenting four possible areas for researches including: the effect ofrisk management on bank performance; the mediating effect of corporate governance on therelationship betweenrisk management;the moderating effect of firm characteristics on therelationship between risk management and corporate governance as well as the moderating effectof firm characteristics on the relationship between corporate governance and firm performance;further, many studies have assumed that the efficient performance of banks’ relies on either riskmanagement, corporate governance and firm characteristics in isolation or in combinations,however future research could focus on the effect of macroeconomic variables such as, financialcrisis, exchange rate, inflation rates, money supply and Gross domestic product as well microeconomic variables such as corporate strategy and management quality on the relationshipbetween risk management, corporate governance and bank .performance. Finally, future researchcould focus on the effect ofrisk management and corporate governance on shareholder return forlisted firms.Key Words: Risk Management, Corporate Governance, Firm Characteristi

The Effect of Mergers and Acquisitions Strategies on Financial Performance of Commercial Banks in Kenya

The operating environment for commercial banks in Kenya has become very dynamic and highly competitive. The witnessed cases of bank failure and poor financial performance have made commercial banks develop strategies to improve their financial performance, remain competitive, and meet the regulator's compliance requirements. Mergers and Acquisitions Strategies are on the rise as a strategy aimed to alleviate the ailing sector. In light of this, the purpose of this study was to examine the impact on financial performance of commercial banks in Kenya as a result of mergers and acquisitions Strategies. Operating efficiency and market share impact on the financial performance of commercial banks in Kenya formed the specific objectives. The study objectives were supported by synergies theory, resource-based view theory and agency theory. The study adopted a correlational descriptive research design, including cross-sectional data analysis.  By the year 2017, 30 commercial banks in Kenya had considered mergers and acquisitions strategies were considered as the population of this study. An average of three-year ratios was computed in both pre-merger and post -acquisition periods inorder to assess the impact financial performance. The years of the deal were excluded. The mean difference between the pre-Mergers and Acquisitions Strategies and post-Mergers and Acquisitions Strategies ratios was tested using the T-test.The findings were that Mergers and Acquisitions Strategies have a statically positive significant relationship with the dependent variable. Recommends from the study are that, the policymakers create policies that facilitate and encourage commercial banks to employ mergers and acquisition strategies to achieve better financial performance

The Effect of Behavioral Factors on Investment Decisions in Real Estate Sector in Nairobi County

Purpose-This study was intent on establishing the effect of behavioral factors on investment decisions in the real estate sector in Nairobi County. The behavioral factors explored for this study were herd behavior, representativeness, anchoring and overconfidence. Methodology-The study exploited descriptive research design to explicate how investors in real estate sector in Nairobi County make investment decisions from a behavioral finance point of view. Descriptive statistics and inferential statistics were used to scrutinize the data. Descriptive statistics adopted in this study included frequencies, mean, percentages and standard deviation. Additionally, inferential statistics of regression models and correlation analysis were used to examine the relationship of the study variables. The scrutinized data were presented in form of frequency tables and pie charts. Findings-The results of the study revealed that 53.71% of the respondents make use of the intuitions when evaluating investment decisions. The outcomes of the study further showed that representativeness, herd behaviour, anchoring and overconfidence have positive correlation coefficients of 0.21, 0.31, 0.16 and 0.32 respectively with the investment decisions in the real estate sector. The multiple R for the regression was 0.817, suggesting a strong positive correlation between the values that the model predicts and the actual values of the dependent variable. The R Square was 0.667 suggesting that about 66.7% of the variation in the real estate investment can be explained by the variation in the extent to which they are influenced by the behavioral factors. The Multiple R and the R Square suggest that behavioral factors exert influence on the investment decisions in the real estate sector. Implications- Behavioural factors analysis provides explanations on the trend of the investors in making critical investment decisions which portray a particular pattern of behaviour in the investment. Investors lack rationality when making decisions about their investments but rather make decisions based on emotions, feelings, mood and sentiments. Value- The study findings will enable investors to acquire skills necessary in eliminating various behavioral biases and increasing their rationality when making investment decisions in the real estate sector

A COMPARATIVE STUDY OF THE RETURNS OF QUOTED SIN AND NON SIN STOCKS AT THE NAIROBI SECURITIES EXCHANGE

Sin stocks are of increased interest since more and more investors and fund managers avoid them whileintegrating social screening with their investment decisions. As a reflection of social norms, sociallyresponsible investing has become a niche of its own in determining investors’ portfolio decisions in the pastdecade. The study adopted an explanatory research design with the population consisting of all firms listen inthe NSE. The sample of the study involved the 20 firm that make up the NSE index. Secondary data usedsecondary data sources in gathering data for analysis which was done using the Statistical Package forSocial Sciences (SPSS version 20) to generate the descriptive statistics and also to generate inferentialresults. T-Tests used to check whether the mean returns of Sin stock differ from the mean returns of non sinstocks. Regression analysis done showed that the type of firm that is either sinstock or non sinstock have apositive and significant relationship with return. T-test statistics indicate that capital gains for sinstocks werehigher than that of non sinstocks. Dividends of nonsinstocks, were slightly lower than that of sinstocks. Fromthe given results, it is evident to conclude that sinstocks have a higher capital gain, return and dividends thanin nonsinstocks