INFLUENCE OF FINANCIAL POLICY ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS LISTED IN NAIROBI SECURITIES EXCHANGE
Abstract
This study sought to assess the influence of financial policies on financial performance of commercial banks listed in NSE. The financial performance was measured by return on asset (ROA). The target population of the study comprised of eleven commercial banks listed in Nairobi Securities Exchange as at 31st December 2017. This study used secondary data extracted from the listed firms financial statements for a period of 5 years from the 2013 – 2017. Stata version 12 was used to analyze the data. Normality test using Jarque Berra test indicated that all variables were normally distributed. Descriptive research design was adopted and panel data extracted from the annual reports and financial statements of listed commercial banks obtained from the NSE websites, Capital Markets Authority library and banks websites. From regression analysis there was enough evidence to report that there is a positive and significant effect of investment policy on financial performance of listed commercial banks. Further, correlation analysis revealed a positive and significant effect of investment policy and financial performance. In addition, correlation analysis showed that there is a positive and significant effect of asset quality policy and financial performance. Correlation analysis revealed positive and significant effect of dividend policy and listed commercial banks financial performance. Regression analysis revealed a positive and significant effect of cash management policy and listed commercial banks financial performance. The study therefore recommended that policies adopted by listed commercial should be customized to serve their client needs. This study further recommended the need for commercial banks to adopt dividend policy which would match with their stages of growth. Finally, the study recommended need for commercial to simulate alternative cash management policies which they can adopt. This would ensure adoption of the most appropriate model more so depending on the prevailing accounting cycle circumstances.
Key Words: Investment, Dividend, Asset Quality, Cash Management Policies, Financial Performance, Commercial Banks
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i2.740
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