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Competition, risk-taking behavior and stability of commercial banks: evidence from Kenya.
(Emerald Publishing., 2023) Kariuki, Peter Wang'ombe.; Wahinya, Purity Wanjiru.; Ondiba, Rogers Ochenge.
Purpose This study analyzes the effects of competition and risk-taking behavior on the stability of commercial banks in Kenya. Design/methodology/approach An unbalanced panel dataset of 36 licensed commercial banks in Kenya for 2001–2020 was extracted from the published financial statements. A dynamic panel data analysis model, a two-step system generalized method of moments (GMM), was employed. Findings The results indicate that competition reinforces bank stability, whereas banks’ risk-taking behavior has an inverse relationship with strength. Practical implications The study confirms the competition-stability nexus, implying that measures may be implemented to foster competition among banks with reduced concentration. These measures may include, but are not limited to, reduced entry barriers and optimal capital requirements. Second, efforts should be made to ensure excessive risk-taking by banks. Employing an elaborate exposure monitoring system with clear warning signs is recommended. Originality/value This study is unique in several ways. First, it employs structural and nonstructural measures of competition and ex post standards of banks’ risk-taking behavior. Second, contrary to past studies, this study uses various firm-level measures of bank stability. Lastly, it provides essential empirical evidence from the context of a developing economy, whose institutional and macroeconomic environments differ significantly from those of a developed economy.
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Do income diversification and capital adequacy affect liquidity creation? A case study of commercial banks in Kenya
(Taylor & Francis., 2023) Kariuki, Peter Wang'ombe.; Kinini, Dennis Muchuki.; Ocharo, Kennedy Nyabuto.
Abstract The paper investigates how income diversification and capital adequacy affect the liquidity creation of banks in Kenya. We employed unbalanced panel data from 36 commercial banks from 2001 to 2020. We extracted data from published banks’ financial reports and statements. The study used the broad and narrow measures to measure liquidity creation. Owing to the persistent nature of liquidity creation, we used a dynamic panel model and a two-step system Generalized Method of Moments (SYS GMM) in the analysis. The findings suggest a positive linkage exists between income diversification and the liquidity creation of commer- cial banks, implying that well-diversified banks have a high level of liquidity creation and vice versa. However, the study discovered a negative relationship between capital adequacy and liquidity creation, supporting the financial fragility-crowding out hypothesis. Consequently, the study suggests that the diversification drive in banks must be reinforced to enhance their liquidity creation. Additionally, due to the tradeoff between capital adequacy and liquidity creation, an optimal level of capital is required to provide a buffer against shocks without negatively impacting liquidity creation, a crucial channel through which banks contribute to the economy
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Capital adequacy, competition and liquidity creation of banks; evidence from Kenya
(Emerald Publishing., 2024) Kariuki, Peter Wang'ombe.; Kinini, Dennis Muchuki.; Ocharo, Kennedy Nyabuto.
Abstract Purpose The study seeks to evaluate the effect of capital adequacy and competition on the liquidity creation of Kenyan commercial banks. Design/methodology/approach Unbalanced panel data from 36 Kenyan commercial banks with licenses from 2001 to 2020 is used in the study. The generalized method of moments (GMM), a two-step system, is employed in the investigation. To increase the robustness and prevent erroneous findings, serial correlation tests and instrumental validity analyses are used. The methodology developed by Berger and Bouwman (2009) is used to estimate the commercial banks' levels of liquidity creation. Findings The study supports the financial fragility-crowding out hypothesis by finding a significant negative effect of capital adequacy on the liquidity creation of commercial banks. The research also identifies a significant inverse relationship between competition and liquidity creation, depicting competition's value-destroying effect. Practical implications A trade-off exists between capital adequacy and liquidity creation, which must be carefully evaluated as changes in capital requirements are considered. The value destroying effect of competition on liquidity creation presents a case for policy geared toward consolidating banks' operations through possible mergers and acquisitions. Originality/value To the best of the authors' knowledge, this is the first study to empirically offer evidence concurrently on the effect of competition and capital adequacy on the liquidity creation of commercial banks in a developing economy such as Kenya. Additionally, the authors employ a novel measure of competition at the firm level.
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Board attributes and sustainability reporting of selected listed nonfinancial firms in anglophone Sub-Saharan African countries: A multinomial logistic regression
(ScienceDirect., 2024) Kariuki, Peter Wang'ombe.; Lewa, Elias Mwasambu.; Gatimbu, Karambu Kiende.
Abstract Resource depletion, social inequality, and climate change are key among the global issues affecting the modern corporate world. Corporate sustainability is a major agenda at corporate boards. Stakeholders are increasingly demanding corporate responsibility in the wake of global resource depletion. Sustainability reporting has been experienced differently in different regions, with emerging economies being adversely stuck. Combating the bearing effects has been difficult due to a lack of synergy among the nations as well as a lack of harmonized corporate disclosure. Understanding the global socioeconomic and environmental concerns requires a close examination of the major determinants of sustainability reporting. Grounded on the agency, stakeholders, and legitimacy theory, this study aims to evaluate the influence of board attributes on sustainability reporting. Using a multinomial logistic regression model, the study assessed 110 nonfinancial firms listed in 10 Sub-Saharan African (SSA) countries from 2016 to 2021. The study analysed the influence of board attributes on sustainability reporting. The result indicates that board size, board meetings, board independence, and board gender diversity have a positive influence on sustainability reporting. The finding provides policy implications and insight into the need for more representative boards with increased gender diversity and independence. Additionally, an optimal frequency of board meetings is needed to strengthen oversight, efficacy, and transparency of sustainability reporting initiatives in SSA. Larger representative board sizes could be rewarded with tax concessions.
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Procurement practices and value for money in State Corporations in Kenya
(PLOS One, 2024) Kariuki, Peter Wang'ombe.; Waci, John Muturi.; Mwirigi, Purity Mukiri.
Abstract Public procurement related expenditure is approximately fifty to seventy percent of the national budget of developing countries and accounts for almost a third of the gross domestic product. Cognizant of the significant funds committed in public procurement, the quest for value for money is critical. This study sought to determine the effect of procurement practices on value for money in State Corporations in Kenya. Specifically, the study investigated the effect of procurement planning, supplier sourcing, supplies management and E-procurement on value for money. Data collected from 87 State Corporations in Kenya was used in this study. The results of the study indicated that procurement planning, supplier sourcing, supplies management and e-procurement positively and significantly affect the value for money in state corporations in Kenya. The study concluded that proper procurement practices positively and significantly affect the value for money in state corporations in Kenya. The findings of this study contribute to literature by providing an empirical examination on the impact of procurement practices and value for money from a developing country perspective.