School of Business
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Item Effect of firm characteristics on credit creation of listed Commercial banks in Kenya(KCA University, 2025) Kuol, David A.This study investigates the influence of firm characteristics on credit creation among listed commercial banks in Kenya over the period from 2019 to 2023. The primary objective is to examine how capital adequacy, asset quality, management efficiency, and bank size affect the ability of these banks to extend credit, measured as the ratio of total loans to total deposits. A descriptive correlation research design is employed, utilizing panel data analysis with fixed and random effects models to assess the relationships between the variables. The target population comprises all 12 listed commercial banks in Kenya, with secondary data sourced from the Central Bank of Kenya and published financial reports. The findings indicate a significant positive relationship between capital adequacy and credit creation, suggesting that higher capital buffers enhance lending capacity. Asset quality also exhibits a positive correlation with credit creation, indicating that lower non-performing loan ratios support greater lending potential. Management efficiency shows a marginally negative effect, implying that efficient operations may reduce capital buffers to prioritize lending. Bank Size demonstrates no significant impact on credit creation. The study underscores the importance of robust capital standards, effective credit risk management, and operational efficiency in enhancing credit creation. These findings provide insights for banks and regulators to strengthen financial stability and support sustainable credit growth in Kenya.Item Determinants Of Financial Performance Among Second Tier Commercial Banks In Kenya(Kca University, 2020) Kitolo, Dorcas M.The main objective of this research was to assess the determinants of financial performance among the second-tier commercial banks in Kenya. The Profitability of commercial banks and their performance has become an important topic of research. However, it is difficult for the management and shareholders to find the right measure to evaluate their banks given the availability of many variables that have been utilized by various scholars to pinpoint factors influencing the financial performance of banks. This dilemma leaves researchers without a satisfactory position and opens up a gap for further analysis of the financial performance among the second-tier commercial banks. The research objectives were asset quality, leverage, capital adequacy and liquidity. The study was guided by the trade-off theory, agency theory, modern portfolio theory and the efficient market hypothesis theory through the theoretical review, empirical review and conceptual framework. Descriptive research design was used to target all the 10 second tier commercial banks in Kenya. Secondary data on the identified inquiry variables were collected for five years between 2014 to 2018. Data from all the 10 second tier commercial banks in Kenya were analysed using STATA on the panel data regression model. Housman test was done to determine which panel regression model was appropriate for the study. Diagnostics tests conducted were multicollinearity, autocorrelation heteroscedasticity and normality for the residuals. The findings were exhibited in a tabular form. The study findings showed that leverage and capital adequacy had a significant negative effect on the financial performance of the banks. However, asset quality has a positive insignificant effect while Liquidity had a negative insignificant effect on return on equity. The study recommends that policymakers should ensure that they adhere to the financial safety net by limiting moral hazard risk and limiting bank failures. The second tier Commercial banks can still increase their debt-to-equity ratio so as to have more capital reserves to survive a financial crisis. The study further recommends for an increase in capital adequacy ratio in all the second-tier commercial banks in Kenya to boost their stability and save them from financial stress and also ensure they maintain adequate capital to cushions the banks about any potential losses hence protecting the interest of bank’s depositors and other lenders and this will enhance financial performance among second tier commercial banks.Item Effect Of Financial Regulations On Financial Performance Of Commercial Banks In Kenya(Kca University, 2018) Muniu, Jeremiah N.The study aimed at determining the effect of financial regulations on financial performance of commercial banks in the Kenyan banking sector. The Central bank of Kenya (CBK) is entrusted with the responsibility of ensuring that the Kenyan banking environment is conducive to operate through establishment of rules and regulations. These regulations have been established around the capital, asset, management, efficiency and liquidity system of rating the commercial banks due to its approach to quantify the soft notion of banks safety. The main objective was therefore to determine the effect of financial regulations on financial performance of commercial banks in Kenya. More specifically, the study sought to determine the effect of each of the capital, assets, management and liquidity regulations on the financial performance of commercial banks in Kenya both within the entity and between entities. The theoretical framework is construed around the public interest theory, private interest theory of regulations as well as the information asymmetric theory. Descriptive design was adopted in analyzing the 37 commercial banks targeted. The relevant panel data was gathered from the (CBK) database for six years starting from the year 2010 - 2015 and analyzed using the linear panel regression models. The findings were presented using graphs and tables, the results indicated that capital adequacy regulations and liquidity regulations have a positive effect on the variation of financial performance while asset quality regulations and management efficiency regulations affect the financial performance of bank in Kenya negatively. Capital adequacy, asset quality and liquidity regulations were statistically insignificant while management efficiency was statistically significant at 95% confidence level. Recommendations call for continuous review of the credit regulations, employment of sound techniques in the management of bank’s operations as well as invitation of scholars to undertake thorough research on the impact of the specific regulations.Item Effect Of Financial Soundness Indicators on The Degree of Diversification in Commercial Banks in Kenya(KCA University, 2023) Nyamunga, Caroline M.Commercial banks are essential to global economies, with Kenyan banks contributing significantly, holding 78.55% of total savings. However, challenges in Kenyan commercial bank performance have led to a consideration of diversification as a means to boost returns and manage risks. This study explored how financial soundness indicators impact diversification in Kenyan commercial banks, examining metrics like capital, high-quality assets, effective management, and liquidity. It drew on four theoretical frameworks—agency theory, buffer capital theory, financial intermediation theory, and stakeholders' proposition—to provide a structured understanding of the situation. The research focused on 36 licensed commercial banks operating in Kenya as of December 2022, analyzing data from 2016 to 2021. Data was sourced from the Central Bank of Kenya's website and banks' annual financial reports, analyzed using STATA software and various tests including heteroscedasticity, correlation, autocorrelation, multicollinearity, and normality tests. Findings showed that capital adequacy, asset quality, and liquidity management significantly influenced diversification levels, with a notable decline in 2018 attributed to political instability following elections. Recommendations include establishing a clear framework for banks to implement financial soundness indicators, especially in asset quality, capital adequacy, management efficiency, and liquidity management. Ensuring bank efficiency is vital for financial sector stability and safeguarding savings. In summary, this study finds that capital adequacy, asset quality, management efficiency, and liquidity management play significant roles in diversification among Kenyan commercial banks. Political instability in 2018 exposed potential risks in banks' diversification strategies. To enhance diversification, effective implementation of financial indicators is crucial, though this study's focus on commercial banks and reliance on secondary data were mitigated through thorough analysis.