Effect of Firm Characteristics on Financial Performance of Listed Commercial Banks in Kenya

Rodah Mong'ina Nyabaga and Joshua Wephukulu Matanda
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Rodah Mong'ina Nyabaga: Jomo Kenyatta University of Agriculture and Technology, Juja, Kenya
Joshua Wephukulu Matanda: Jomo Kenyatta University of Agriculture and Technology, Juja, Kenya

International Journal of Economics and Financial Issues, 2020, vol. 10, issue 3, 255-262

Abstract: A country s economy relies majorly on the banking sector. This study examined the effect of firm characteristics on financial performance with a focus on listed banks in the Nairobi Securities Exchange for the period from 2010 to 2018. The bank characteristics examined were: capital adequacy, leverage, asset quality and bank size. The collected data was analyzed using STATA 11 and this was basically descriptive, correlation and regression analysis. The findings depicted a significant positive effect of capital adequacy on both returns on equity (ROE) and returns on assets (ROA). The findings further indicated a significant negative effect of asset quality on ROE but an insignificant negative effect on ROA. On leverage, the findings indicated a significant positive effect on ROE and an insignificant positive effect on ROA. The findings of this study indicated that bank size has a significant positive effect on both ROE and ROA. This study concluded that capital adequacy and bank size have a significant positive effect on performance. There were mixed findings on the effect of asset quality and leverage on performance. The study recommended that, listed commercial banks should maintain a considerable capital adequacy to be able to effectively absorb losses emanating from economic shocks.

Keywords: Firm characteristics; financial performance; Commercial banks (search for similar items in EconPapers)
JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2020-03-30

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