Firm Characteristics and Financial Performance of Commercial Banks Listed On the Nairobi Securities Exchange
Loading...
Date
2021
Authors
Muema, Festus Mutinda
Abdul, Farida
Journal Title
Journal ISSN
Volume Title
Publisher
IOSR-JEF
Abstract
Commercial banks be key financial service providers and based on which firm characteristics the management
of each bank adopts, their financial performance has been observed to vary. The current research paper sought
to interrogate the influence firm characteristics had on Nairobi Securities Exchange listed commercial banks' in
Kenya financial performance. This study’s main intent was to examine how firm characteristics influenced NSE
listed commercial banks' financial performance. This research’s specific intents was: to examine what effect the
five selected firm characteristics have on Kenyan commercial banks performance, which include liquidity,
leverage, solvency, asset structure, and the moderating effect of interest rate. This study was anchored on the
pecking order, trade-off, and liquidity preference theories. The study adopted a causal research design that
identifies the range as well as the description of the effect and cause of a correlation as well as the patterns of
relationships between study variables. All the NSE-listed Kenyan commercial banks were the target populace.
Statistical data of the financial statements were obtained from NSE and the CBK website. The study adopted a
time scope of 7 years ranging from 2014 to 2020. Various diagnostic tests such as bivariate correlation
analysis, normality test, Hausman specification test, multicollinearity test, and heteroscedasticity were carried
out for the determination of the data reliability and validity. The descriptive statistical analysis acted as the tool
for data analysis with the help of regression models. Results from the statistical analysis indicated a statistically
significant correlation between liquidity, solvency, and asset structure, with the financial performance of
Kenyan NSE listed commercial banks. Leverage on the other hand was observed to have an insignificant
influence on performance. The rate of interest is also observed to have a significant influence on the correlation
betwixt firm attributes and financial performance. This research suggests that central bank as a regulator of the
commercial banks in Kenya to make use the results from the study to come up with regulations that are not too
unfair to the banking institutions and that are based on the current business climate in the country. The
Government can also use results from this study to set up stipulations that can help improve the operations of
the banking sector to address the financial performance indifferences being experienced within the banking
industry.
Description
Article
Keywords
Firm Characteristics, Financial Performance, Commercial Banks, Nairobi Securities Exchange
Citation
Festus Mutinda Muema, et. al. “Firm Characteristics and Financial Performance of Commercial Banks Listed On the Nairobi Securities Exchange.” IOSR Journal of Economics and Finance (IOSR-JEF), 12(3), 2021, pp. 01-13.