Browsing by Author "Simiyu, Eddie"

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    Bank-Specific Characteristics and Financial Distress of Commercial Banks in Kenya
    (IAJEF, 2024-11) Githinji, Mary Wangechi; Simiyu, Eddie; Omagwa, Job
    Empirical evidence on the banking industry in Kenya indicates that local banks have been prone to financial distress. Commercial banks in Kenya have been experiencing cycles in Financial Distress and though such cycles have been precipitated by Bank-Specific Characteristics in other countries. It is still a challenge for empirical investigation as to know whether Bank-Specific Characteristics significantly affect Financial Distress in Kenya’s banking industry. Subsequently, the basis of this research was to evaluate the connection between Bank-Specific Characteristics and Financial Distress of commercial banks in Kenya. Explicitly, the research was informed by determining the Income Diversification on Financial Distress of commercial banks in Kenya. The Gambler’s ruin theory and Modern portfolio theory provided theoretical anchorage to the research. Positivism research philosophy and causal research design were adopted for the study. The research was a census of all the 36 fully operational commercial banks in Kenya for the period 2011 through 2019. Secondary data was utilized in this study. Data sources included: websites of the CBK and individual Commercial Banks, audited financial statements and Annual supervision reports. Data analysis entailed use of descriptive and inferential statistics where the latter involved dynamic panel logistic regression analysis. Diagnostic tests undertaken in the study included: model specification, stationarity, autocorrelation, and multicollinearity tests. Hypotheses were tested at a significance level of 0.05. Data was displayed through frequency tables and graphs. Based on the dynamic panel Logistic regression analysis, the research revealed that Income Diversification had a significant effect on Bankometer Score (β=0.3504847, p=0.002) on commercial banks in Kenya. The study recommended that banks should diversify their revenue streams into new business areas and markets while considering risks and capabilities.
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    Dynamic Linkages of Stock Market Sectors: Evidence from the Kenyan Stock Market
    (Science and Education Publishing, 2020) Simiyu, Eddie; Korir, Julius; Laiboni, Gabriel
    This paper undertakes an empirical investigation into the dynamic linkages of the Nairobi Securities Exchange’s sectors. Using weekly indices for the 9th June 2008 to 14th February 2019 period, it examines the dynamic linkages of the Investment, Manufacturing and Allied, and Banking sectors. The study finds out the presence of one cointegrating relationship in the long run. A Vector Error Correction Model is fitted to estimate the temporal relationships of the three indexes. Results of Granger Causality testing, which are based on the VECM output, indicate the presence of bidirectional granger causality between the Manufacturing and Allied & Banking sectors as well as the Banking & Investment sectors. However, there is no granger causality between the Investment & Manufacturing and Allied sectors. Impulse response analysis show that shocks to the Manufacturing and Allied Sector are least significant in terms of their ability to invoke responses from other sectors, while shocks to the Banking sector are most influential as far are the tendency of elevating the volatility of other sectors’ indexes is concerned. Forecast Error Variance Decomposition (FEVD) analysis further indicate that shocks to the banking sector are most influential in terms of their explanatory power of other sectors’ forecast variances. The study therefore concludes that the banking sector has the highest tendency to influence other sectors’ volatility, while the Manufacturing and Allied Sector is least significant in terms of its ability to influence other sectors’ volatility. Therefore, it is recommended that that stocks that are listed under the Manufacturing and Allied Sector should be considered for diversification purposes due to the low scale of linkages that this sector has with other sectors. But, better still; investors should seek inter-market diversification opportunities in order to tap fully into the benefits of portfolio diversification.
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    The Effect of Firms' Inclusion in the NSE 20 Share Index on Share Performance in Kenya
    (International Organization Of Scientific Research (IOSR), 2019) Nkuru, Faith N.; Muathe, Stephen M. A.; Simiyu, Eddie
    This paper provides an empirical analysis of Kenya as an emerging market that has a lot of potential of investment and is getting attention from investors both locally and internationally. Nairobi Securities Exchange 20 Share index represents a tool to measure market performance, market growth and facilitates maximisation of return on investment over a long – run perspective. The Nairobi Securities Exchange 20 Share index is constituted by the best performing firms. This paper analysed the effect of firms' inclusion in the Nairobi Securities Exchange 20 share index on share performance in Kenya. The study was anchored on Efficient Market Hypothesis supported by The Price Pressure Hypothesis and Traditional Information Hypothesis. The study employed explanatory research design. Target population of the study was 30 firms included in the Nairobi Securities Exchange 20 share index in the period between 2002 and 2014. The study used secondary data, collected from Nairobi Securities Exchange 20 share index markets report. The secondary data was collected using abstraction tool. The data which was obtained was analyzed using descriptive statistics, Buy and Hold event methodology. This study found out Average Cumulative Buy and Hold Abnormal Share Return after the firm inclusion in the Nairobi Securities Exchange 20 share index was significantly different from zero. The study recommends investors should invest in firms included in the Nairobi Securities Exchange 20 share index.
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    External Financial Environment Drivers and Financial Performance of Islamic Banks in Kenya
    (International Academic Journals, 2017) Hassan, Nasra Haret; Simiyu, Eddie
    External financial environment is a major factor that affects the financial performance of Islamic banks. Making money in today’s highly regulated and competitive markets is a lot harder and Islamic banks should be more customers centric in their propositions, delivery and service. Doing so will be challenging, especially since Islamic banks will need to focus on innovation and on improving their cost efficiency relative to their conventional counterparts. The risks in Islamic banking are not the same as other financial intermediaries therefore the absence of Shariah compliant legal framework needed to create sound financial institutions to reinforce bank’s operating environment, internal governance, market discipline and the risks in the market.The objectives of the study was to investigate the effects of regulatory drivers, technological drivers, demographic drivers and economic drivers on financial performance of Islamic banks in Kenya. The study was anchored on economic theory of regulation, Schumpeter theory of innovation, and Mohsin theory. The study was conducted through the use of descriptive research design since it is concerned with finding out what, where and how financial external environment affects financial performance of Islamic banks. A census of all the Islamic banks was done the unit of analysis were top and middle level managers of 2 fully fledged Islamic banks. The unit of observation were top and middle level managers of Islamic banks and stratified random sampling was employed. A population of 110 was used for this study. A sample of 30% of 100 was applied which gives a total of 33 respondents. A questionnaire was constructed and used to collect data for this study. The instrument was validated through the use of professionals or experts, while split half method was applied to determine instrument reliability. Quantitative data was analysed using descriptive statistics, correlation coefficient and multiple linear regressions. The study realized that regulatory drivers, economic, technological, demographic and economic drivers significantly contributed to the financial performance of Islamic Banks in Kenya as indicated by a R2 of 0.915. The study concluded that the drivers are both challenges and opportunities to be exploited by the banks in their favour. It was recommended that the banks need to be compliant with Shariah banking and capitalize on the opportunities in the sector.
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    Financial Management and Performance of Commercial State-Owned Enterprises in Kenya
    (International Academic Journals, 2019) Waweru, Allan Kamau; Simiyu, Eddie
    Most State owned enterprises are faced with a challenge of poor financial management as reflected in misuse of financial resources and inefficiencies in internal control systems. At the same time, most state-owned enterprises have consistently been making losses and some of the reasons cited are lack of sound financial management, poor reporting and tracking systems, lack of internal control systems and audit teams. These challenges result into the need of determining the interaction between financial management and performance. The main objective of this study was to assess financial management and performance of Commercial State-Owned Enterprises in Kenya. Specifically, the study sought to determine how internal control system, budgeting, financial reporting and tracking and risk management influence performance of state-owned enterprises. At the same time, the study sought to determine the moderating effect of organizational culture in the link between financial management and performance. The study was anchored on three theories including contingency, risk and resource-based theory, the empirical literature covers the five independent variables and the dependent one and the conceptual framework draws a picture of the variables and measuring indicators and the linkage of the variables. The type of design employed was descriptive in nature. The population of the study comprised of 29 Commercial State-Owned Enterprises and the respondents were 111 finance directors from these firms. Census sampling was adopted where all the 111 finance directors formed the study sample. For collection of data, questionnaires were used. The analysis of the collected data was done descriptively and inferentially. To present findings, tables and figures were used. From inferential statistics, internal control, budgeting, financial reporting and tracking, risk management and organizational culture all statistically influence how state-owned enterprises perform financially. The study concludes that internal control, budgeting, and financial reporting and tracking, risk management and organizational culture all have statistical and significant influence on the ability of state-owned enterprises to perform financially. The study recommends that the Chief Executive Officers of State-owned enterprises should initiate policy guidelines in regard to corporate governance and ensure that their full implementation with regular feedback. The finance managers of state-owned enterprises should closely work with budgeting committee to ensure that proper budget is put in place for improved performance of the organizations. The accountants of state-owned enterprises should ensure that regular financial reports are prepared in line with International Financial Reporting Standards. Risk managers of all state-owned enterprises should regularly assess and advice the management on inherent risks that are likely to affect financial performance. The management of state-owned enterprises should improve on the norms and beliefs of employees through increased team work, performance appraisal and reward systems.
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    Financial Risk and Profitability of Microfinance Banks in Kenya
    (The Strategic Journal of Business and Change Management, 2024) Nyangaresi, Richard Bisera; Simiyu, Eddie
    The objective of this research was to assess the effect of financial risk on profitability of microfinance banks in Kenya. The study was based on five theories namely; portfolio theory, information asymmetry theory, capital buffer theory, shiftability theory, and operational risk theory. A causal research design was adopted. The population of the study was the 14 microfinance banks operating in Kenya as at 31st December 2022. Census was used. The study utilized secondary data gathered using a data collection instrument and document review guide. The data was collected from the Central Bank of Kenya. The secondary data collected was on an annual basis and covered a period of 5 years (January 2018 to December 2022). Data was analyzed using mean, mode and standard deviation for descriptive statistics and panel regression analysis. The research discovered and subsequently determined that financial risks have a favorable and substantial impact on the profitability of microfinance banks. The findings of the study indicate that credit risk, liquidity risk and operational risk have a statistically significant negative effect profitability. However, it was observed that market risk do not have a statistically significant effect on the profitability. The research further confirmed that competition had a moderating role in the association between financial risk and profitability. The study further found that the effect of financial risks on the profitability of microfinance institutions was mediated by income diversification. The study concluded that profitability of microfinance bank is affected by financial and is further mediated and moderated by income diversification and competition respectively. The study recommended that MFBs to focus on developing strategies that optimize working capital management. This would enable them to effectively meet their short-term financial commitments. In regards to market risk, the Central Bank of Kenya (CBK) could develop and implement more stringent capital adequacy requirements for microfinance banks that are exposed to market risk, and conduct regular stress tests to assess their resilience to market shocks. In relation to operational risk, the research suggests that micro-finance institutions should prioritize the implementation of appropriate laws, regulations, and procedures. These measures aim to mitigate company losses and facilitate seamless operations, ultimately leading to enhanced profitability.
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    Foreign Capital Flows and Stock Market Capitalization at the Nairobi Securities Exchange, Kenya
    (International Knowledge Sharing Platform., 2020) Osoro, Cliff; Simiyu, Eddie; Omagwa, Job
    Since the onset of financial markets liberalization in the early 1990s, the volume of capital inflows to emerging capital markets has grown to unprecedented levels. Despite growth in capital flows, emerging capital markets are characterized by small size and very low liquidity. In the period 2008-2018, the number of listed firms at the Nairobi Securities Exchange increased only by twelve firms from 55 listed firms in the January 2008 to 67 listed firms as at December 2018 giving an average annual increase of approximately one firm per year. This study therefore sought to establish the effect of foreign capital inflows on stock market capitalization at the Nairobi Securities Exchange, Kenya. The study adopted a causal research design and time series data for the period 2008- 2018 was analysed using correlation analysis, and the Autoregressive Distributed Lag Model. The findings from correlation analysis indicate that foreign direct investment had a negative and significant effect on stock market capitalization while foreign equity portfolio inflows had negative but insignificant effect on stock market capitalization at the Nairobi Securities Exchange, Kenya. The autoregressive distributed lag test results support the existence a significant short run positive effects of all foreign capital inflows on stock market capitalization as evidenced by the negative and significant coefficient of the Error Correction Term (ECT). However, in the long run foreign direct investment had a significant negative effect on stock market capitalization while the effect of foreign equity portfolio on stock market capitalization was equally negative but insignificant in the long run. In view of the foregoing findings, there is need for the Kenyan government to reconsider its foreign investment policy to target only productive foreign capital inflows. Moreover, the Capital Markets Authority needs to implement policy measures that will attract active participation of the local investors at the Nairobi Securities Exchange.