A survey on transparency and disclosure of risk information in the Kenyan banking industry

Abstract

The study sought to explore the extent of transparency and disclosure of risk practices in the banking industry in Kenya. Emphasis was on the following research questions; extent to which Kenyan Banks disclose risk information and the factors that influence the disclosure of risk information. Primary data was collected through questionnaires and distributed to senior managers in the banks operating in Kenya. Data collected was analyzed by use of descriptive statistics and SPSS (12.0) was used for the purpose of the analysis. Results obtained indicate that all banks disclose risk information in the annual audited accounts. However, risk disclosure is still a new concept as only 57% of the banks had been disclosing risk information for a period of over 3 years. Majority of the banks indicated that disclosure of risk information resulted in benefits such as increased management and board credibility, better management of business risks as well as improved corporate governance. The banks ranked credit and liquidity risks as the most important risks that require to be disclosed. The study’s major limitation was the low response rate at 51% considering the size of the banking industry in Kenya. However, on the positive side, the study can be used as the foundation in the extent of disclosure of risk information in the banking industry as well as to other financial sectors in Kenya