Prudential Requirements and Financial Performance of Commercial Banks Listed at the Nairobi Securities Exchange, Kenya
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Date
2025-09
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Kenyatta University
Abstract
Commercial banks have a vital and varied function they perform. In Kenya, commercial banks
are essential to industrialization and job creation as well as the financial development of the
majority of market participants. Nonetheless, commercial banks' financial performance has
been deteriorating over time. For example, profitability fell to Ksh.112.1 billion in 2020 from
Ksh.159.1 billion in the prior financial period—a 29.5% negative shift. The conceptual linkage
between commercial banks' financial performance and regulatory standards has portrayed
dissimilar debate amongst scholars over the years. This study focused on the precise goals
listed; exploring the influence of liquidity, capital adequacy, and asset management on the
Nairobi Securities Exchange's (NSE) listing commercial banks' operating results. The
investigation was anchored on Keynes liquidity preference, the capital buffer and the liabilities
management theories. The investigation utilized causal-effect research approach. The target
audience comprise of eleven (11) listed commercial banks in NSE, Kenya whereby census
approach was used therein. The study analysis was based on descriptive as well as panel
regression analysis.Prior to drawing investigational deductions and conclusions, diagnostic
testing was conducted. The outcome was presented using tables and figures. Ethical issues
were given pre-eminence where a permit from Kenyatta University graduate school was sought
and NACOSTI in that order. Findings unveiled that liquidity exhibited a statistically significant
direct influence on financial performance; capital adequacy indeed exerts a significant and
positive influence on financial performance; and asset management depicted negative
influence on financial performance, which was statistically significant. The survey advices that
the banks should focus on other risk management strategies, such as credit risk, operational
risk, and market risk to enhance their performance financially. Implementing robust risk
management frameworks and diversifying risk exposure would help ensure overall financial
stability and resilience
Description
A Research Project Submitted to the School of Business In Partial Fulfilment For the Award of Degree in Master of Business Administration (Finance Option) Kenyatta University. September, 2025
supervisor
Geoffrey Mbuva