Examining the Role of Capital Structure in Financial Performance in Kenyan Banks: Comparative Evidence from Equity Group, KCB Group, and Stanbic Kenya

Arnold Omondi Olunja
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Arnold Omondi Olunja: United States International University – Africa-Chandaria School of Business

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 3, 2387-2405

Abstract: This study examined the role of capital structure in financial performance among Kenyan banks, focusing on Equity Group, KCB Group, and Stanbic Kenya over the financial years 2021–2023. The study aimed to analyse the relationship between capital structure and profitability, assess its impact on financial stability, investigate the effects of agency costs on capital structure decisions, and develop strategic recommendations for optimal capital management. The research was grounded in the Modigliani-Miller Theory, Trade-Off Theory, Pecking Order Theory, and Agency Theory, which provided a theoretical framework for understanding capital structure decisions in the banking sector. A quantitative research design was adopted, utilising secondary financial data from audited financial statements and regulatory reports. Regression analysis was conducted using SPSS to establish the relationship between debt-to-equity ratios, Return on Equity (ROE), and Return on Assets (ROA).

Date: 2025
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