Agency Banking and Profitability of Commercial Banks Listed at Nairobi Securities Exchange, Kenya
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Date
2024-10-23
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journal of Economics and Finance (IAJEF)
Abstract
Despite the instrumental role played by listed
commercial banks in Kenya in terms of
employment creation, these institutions are
currently facing problems of the profitability.
For instance, across the period 2018-2022, the
value of return on equity has averaged at
13.15% against similar industry figures in
South Africa estimated at 20.15%. This
provide a clear indication that majority of the
listed commercial banks in Kenya are
underutilizing their equities to generate
profits for shareholders. The inquiry’s
essence was to establish the effect of agency
banking liquidity agency banking fee and
bank size on profitability. The transaction
cost theory, market power theory and public
interest theory of bank regulation. Relevant
empirical studies were reviewed to inform the
development of the conceptual framework
anchored the inquiry. Positivist philosophy
and explanatory design were used. The study
adopted direct regression model and
moderation regression model to achieve the
analysis of the findings. This study targeted
12 listed commercial banks in Kenya and
census was used since the population is small.
Information in its secondary nature will be
gathered with aid of data collection SPSS for
descriptive analysis as well as inferential
analysis aided by the sheet on a period from
2018 all trough to 2022. Prior to this,
diagnostic tests covering Heteroscedasticity
Test, multicollinearity and normality were
done and appropriately interpreted. Results
presentation was in tabular and graphical
means. As part of the ethical concern, the
study sought for relevant authorization
documents. The study established that agency
banking fee had significant effect on
profitability of the listed commercial banks in
Kenya. Furthermore, firm size was not
significant while interaction term was
significant and hence firm size as deduced to
be a partial moderator variable. In conclusion,
agency banking was a significant predictor of
profitability of a financial institution. It was
recommended larger banks in tier I and II
should leverage the economies of scale they
enjoy in the market to invest heavily in agency
banking for more profit generation.
Description
Article
Keywords
Citation
Matan, M. H., Aluoch, M. O., Suva, M. (2024). Agency banking and profitability of commercial banks listed at Nairobi Securities Exchange, Kenya. International Academic Journal of Economics and Finance, 4(3), 229-247.