School of Business
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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.Item Effect Of Capital Structure On The Liquidity Of Deposits Taking Saccos In Kenya(KCA University, 2024) Mwiti, JasperThe effects and the existence of an optimal capital structure has remained a matter of academic debate since the capital structure irrelevance proposition by Modigliani and Miller in 1958. According to the SASRA’s SACCOs annual supervision report of 2022, deposits taking SACCOs in Kenya hold over 700 billion Kenya shillings in assets. This study sought to determine the effect of capital structure on the liquidity of deposit taking SACCOs in Kenya. The study used a descriptive research design to collect panel data from the published financial statements of deposit taking SACCOs in Kenya in relation to capital structure, in particular the long-term debt, equity and members non-withdrawable deposits. The study found out 59% of variations of liquidity levels of deposits taking SACCOs in Kenya can be explained by the long-term debt, share capital and the members’ non-withdrawable deposits in their capital structure. The study established that capital structure component of DT SACCOs in Kenya, namely; long-term debt, share capital and non-withdrawable deposits have an influence on the SACCO liquidity position. The study established that long-term debt has a positive and a significant effect on the liquidity risk of deposits taking SACCOs in Kenya. An increase in long-term debt will positively affect the SACCO liquidity level with 3.175 units. The study found out both the share capital and the non-withdrawable deposits also have a positive and significant effect on the liquidity levels of deposits taking SACCOs in Kenya, share capital (β= 1.122, p value <0.05), non-withdrawable deposits with (β= 3.011, p value <0.05). The study recommends to policy makers to develop a strict liquidity prudential guidelines mechanism to safeguard and limit the liquidity risk exposure of DT SACCOs and the need of the SACCOs’ management to continuously evaluate the cost of source of funds against the interest revenue generated from loans to members as lending is the core business of DT SACCOs in Kenya so as to manage their liquidity risk exposure. Consequentially with the noted study limitations, a future study on the capital structure on liquidity of non-deposit takin SACCOs should be carried as well as a survey of all the licensed deposits taking SACCOs in Kenya using a well-structured questionnaire to capture the primary data from the SACCOs’ management in regard to effect of capital structure on liquidity management.