Abstract:
Hazards that arise from factors whose growth is not reflected in the balance sheet are said to be "off-balance sheet risks." Contingent obligations, commitments, transactions connected to markets, advice management, and underwriting duties all pose significant threats to the long-term viability of businesses. The purpose of this research was to analyze the effect of off-balance-sheet risks on the overall financial performance of commercial banks traded on Kenya's Nairobi Securities Exchange. These four hypotheses guided the inquiry of the connection between off-balance-sheet risk and the bottom lines of publicly traded commercial banks. The descriptive research approach was used because it made it possible to get more information and interpretations of financial reports in the same manner in which they were presented. The population of 11 listed Commercial Banks served as the objective for this study. To determine the appropriate sample size for the investigation, Yamane's formulas were used, and the ten commercial banks that were on the list were chosen at random. The data collecting sheets that were released as part of the financial reports served as the source for the secondary data. The data that was obtained was analyzed using version 21 of the Statistical Package for Social Scientists, which allowed for the calculation of descriptive statistics such as means and standard deviations, as well as inferential statistics such as correlation and regression analysis. According to the findings of the research, the credit risk associated with cooperative banks was the greatest, while the credit risk associated with equity banks was the lowest as evaluated by the debt to equity ratio. According to the findings of the research, CFC Stanbic Holding had the greatest credit risk, whilst Equity bank had the lowest credit risk as evaluated by the ratio of debt to capital. The research also found that market risk had a modest and negative link with the financial performance of listed Commercial Banks in Kenya (r = -.338, p-value > 0.05), which was a finding that was supported by previous findings. Based on the ratio of liquid assets to total assets, the research came to the conclusion that Stanbic bank posed the greatest threat to the institution's liquidity. As a result, the company's financial performance was more adversely influenced by the presence of liquidity risk. According to the findings of the research, cooperative banks and CFC Stanbic Holding, both of which had the greatest credit risk, should implement appropriate credit risk management mechanisms in order to prevent adverse consequences on their financial performance. This would assist it in reducing the number of defaults on its loan, resulting in improved financial performance.
