Effect of Market Discipline on Financial Performance of Commercial Banks in Kenya
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Date
2022
Authors
Mathina, Ruth
Jagongo, Ambrose
Wamugo, Lucy
Journal Title
Journal ISSN
Volume Title
Publisher
Science and Education Publishing
Abstract
Commercial banks practicing improved information disclosure in their annual reports have recorded
better performance. However, despite the mitigating efforts by the central bank of Kenya, commercial banks have
recorded a decline in performance as shown by reduction in average return on assets over the period of study, that is;
4.7% in 2013, 3.4% in 2014, 2.9% in 2015, 3.3% in 2016, 2.7% in 2017, 2.7% in 2018, 2.6% in 2019 and 1.7% in
2020. The study sought to establish the effect of market discipline on performance of commercial banks in Kenya.
Causal research design was employed. The target population included 38 commercial banks operating in Kenya
between 2013-2020. Secondary panel data was collected from the banking supervision and individual bank’s
published annual reports. Data analysis involved descriptive statistical analysis so as to determine the trend of the
study variables while linear regression was used to test the relationship between market discipline and financial
performance. The decision whether to fit a random or fixed effects model was determined after running Hausman
specification test. Findings of the study were presented using tables while hypotheses were tested at 0.05
significance level. The study found out that market discipline insignificantly influenced financial performance of
commercial banks in Kenya. The study recommends, that the managers of commercial banks should ensure that they
strictly adhere to the regulations on information disclosure set by the central bank of Kenya in order to enhance their
financial performance in the long run although the influence was not significant
Description
Article
Keywords
market discipline, performance, commercial banks
Citation
Mathina, R., Jagongo, A., & Wamugo, L. (2022). Effect of Market Discipline on Financial Performance of Commercial Banks in Kenya. Journal of Finance and Economics, 10(1), 1-6.