Systematic Risk and Financial Performance of Commercial Banks Listed at the Nairobi Securities Exchange, Kenya
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Date
2024-06
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Kenyatta University
Abstract
The systematic risks and financial performance subject on commercial banks have been widely discussed by many scholars with minimal theoretical, contextual and methodological solutions thereof. The general objective of this study was to establish the influence of systematic risk on the productivity aspect of the commercial banks in terms of financial performance which are listed at the NSE in Kenya. Specific objectives were; to determine the influence of inflation on financial performance of commercial banks listed at the Nairobi securities exchange, Kenya, to examine the influence of interbank interest on financial performance of commercial banks listed at the Nairobi securities exchange, Kenya and to evaluate the influence of foreign exchange on the financial performance of the commercial banks listed at the Nairobi securities exchange, Kenya. The study was anchored on International Fisher Effect theory, Loanable Funds theory and purchasing power parity theory. The study utilized descriptive research design. The target population comprised of twelve (12) listed commercial banks in NSE, Kenya whereby census approach was used therein with only 11 firms qualifying for the data collection exercise. The study utilized descriptive as well as panel regression for analysis purposes. Ethical issues will be given pre-eminence where a permit from Kenyatta University graduate school will be sought and NACOSTI in that order. The research outcome portrayed that commercial bank which are listed at the Nairobi securities exchange, Kenya has their financial performance being influenced by inflation and it took an inverse and statistically insignificant direction. Again, commercial bank which are listed at the Nairobi securities exchange, Kenya have their financial performance being influenced in a statistically significant way by interbank interest and in a positive manner and lastly, foreign exchange negatively influenced the productivity aspect of the commercial banks which are listed at the NSE, Kenya as far as financial performance is concerned and it was statistically significant. To the top management of commercial banks, the theoretical viewpoint of inflation, interbank interest and foreign exchange and financial performance is a eye opener for the inverse link of inflation will guide them to establish policies which foster the purchasing power of the end users of their products, namely their customers. The top management of Nairobi securities exchange have an empirical frontier set for them in making financial sustainability policies specifically targeting the commercial banks for those financial institutions are uniquely affected by foreign exchange and interbank interest in addition to the normal interest rates. This will help the NSE team to mitigate cases of delisted banks. The academicians are beneficiaries of the study outcome for the methodological gap on how to measure the inflation, interbank interest, foreign exchange and financial performance of commercial banks has been placed in a new debatable frontier.