Abstract: The decline in stock returns and the increasing financial risks at the stock market in Kenya has solicited discussions at the academic and regulatory circles to find solutions on challenges facing investor’s capacity to reliably predict stock returns volatilities. This study sought to investigate the influence of financial risk on stock returns. Annual data for period 2006 to 2015 has been used. The stock return data of 9 banks listed from 2006 to 2015 was used as dependent variable while credit risk, market risk, liquidity risk and capital risk was used as independent variables. Bank size was used as a control and moderator variable.