Bank Specific Drivers and Financial Performance of Tier III commercial Banks in Kenya

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dc.contributor.advisorEddie M. Simiyuen_US
dc.contributor.authorGacanja, Caroline Ngima
dc.date.accessioned2024-02-06T09:32:35Z
dc.date.available2024-02-06T09:32:35Z
dc.date.issued2023-11
dc.descriptionA Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of a Master Degree in Business Administration (Finance Option) of Kenyatta University, November 2023.en_US
dc.description.abstractCommercial bank sector in Kenya averagely developed rapidly between 2015 and 2020. In 2016, total net assets increased by 5.8%, from Kes 3.5 trillions to Kes 3.8 trillion. Net borrowing increased by 5.6 percent to Kes. 2.2 trillionsin 2016, compared to Kes. 2.17 trillions in 2015. From Kes 134.0 billion in 2015 to Kes 147.4 billion in December 2016, the sector's pre-tax earnings climbed by 10.91 percent. As classified in terms of market share, it was shown that Tier iii commercial banks' pre-tax earnings declined by 2.2 percent between 2015 and 2016, with a 3.5 percent loss in return on assets in 2017, 4.2 percent in 2018, 4.7 percent in 2019, and 5.5 percent in 2020. In 2019, a number of banks, including First Community Bank, which lost Kshs. 41.0 million, Jamii Bora Bank, which lost Kshs. 490.0 million, and Consolidated Bank, which lost Kshs. 277.0 million, Thereby failing to meet shareholders expectations in growth of profitability and shareholders wealth maximisation. For failure to fulfil required cash reserve ratios, and also having huge non-performing loans and insufficient corporate governance systems. As a result, the current research intended to determine how bank specificdriversaffected the financial performance of Kenya's Tier III commercial banks. The specific objectivesof the study were to look at the effect of capital sufficiency, asset quality, and enterprise value on Tier III financial firms' financial performance. Keynessian Theory, Financial Acceleration Theory, Efficiency structure and Capital irrelevance theory were the major pillars of the research. Causal research design was used to explain the cause and effect of specific business drivers and its effect on financial performance. Secondary data collection schedule was used to collect secondary data. Data was sourced from the audited financial statements of the targeted 21 banks.A census survey was carried out due to a manageable small size of the population. Quantitative analysis was used in data analysis with the help of STATA. Several Diagnostic tests were done to test the normality, multicollinearity and heteroskedascity. Ethical issues were considered in writing the proposal, report writing, citing and collection of data. Capital adequacy results obtained from the nineteen commercial banks constituted of equity divided by total assets. The results indicated that majority of the Tier three commercial banks capital Adequacy ratio was very low compared to the sector average. The finding on asset quality illustrates management's capacity to recognize and control credit risk. The asset quality indicates high non-performing loans in the Tier three Kenya commercial banks for the period under study. The results showed that banks had insufficient capital on hand to be able to absorb a specific level of losses before running the risk of going bankrupt. The results indicated that the tier three commercial banks had on average similar amount of total assets. The study concluded that bank size had no significant impact on Rreturn on Equity. The size of the bank has no effect on how ROE fluctuates by the unit. The study concluded that asset quality had a positive and significant effect on Return on Equity. A positive unit change in asset quality results to a positive unit changes in Return on Equity. The concluded that income diversification significantly affects Return on Equity. The study concluded that capital adequacy significantly affects Return on Equity.The study recommended that the tier three bank directors should ensure that capital adequacy, asset quality and income diversification are maintained at the highest level to ensure increased return on equity.en_US
dc.description.sponsorshipKenyatta Universityen_US
dc.identifier.urihttps://ir-library.ku.ac.ke/handle/123456789/27567
dc.language.isoenen_US
dc.publisherKenyatta Universityen_US
dc.subjectBank Specific Driversen_US
dc.subjectFinancial Performanceen_US
dc.subjectTier III commercialen_US
dc.subjectBanksen_US
dc.subjectKenyaen_US
dc.titleBank Specific Drivers and Financial Performance of Tier III commercial Banks in Kenyaen_US
dc.typeThesisen_US
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