THE MODERATING EFFECT OF BANK SIZE ON THE RELATIONSHIP BETWEEN FINANCIAL DISTRESS FACTORS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Abstract
The Central Bank of Kenya advised commercial banks to take precautions for the growth of banking industry. In Kenya Imperial Bank and Chase Bank were placed under liquidation due to liquidity problems. CBK established performance of Banks whereby 8 Banks obtained a negative ROA as a result of poor investments. The main objective of this research was to establish the moderating effect of Bank size on the relationship between financial distress factors and financial performance of Commercial Banks in Kenya. This study was guided by pecking order theory. The study used a cross sectional but descriptive survey design on 39 commercial banks incorporated under census survey. Secondary data results were retrieved from annual financial statement reports of Kenyan Commercial Banks. This study would help Commercial Banks stakeholders in enabling performance. Panel data was used and hypothesis test at a significance level of 0.05. Descriptive analysis included; skweness, kurtosis and jarque bera while inferential analysis involved correlation analysis. The study ensured that the assumptions of linear regression based on normality test and linearity were tested. The data was presented in form of tables and models. The results were that incorporation of (IV*MV) thus interaction terms moved R squared from 0.4705 to 0.4774. The change was of P=0.007 hence significant. This small increase implied that firm size interaction had no moderating effect on the relationship between financial distress factors and financial performance of Commercial Banks. Furthermore, the insignificance arising on earlier significance variables after introduction of interaction term confirmed that firm size has no moderating effect on the dependent and independent variables. The study therefore accepted the null hypothesis that firm size has no significant moderating effect on the relationship between financial distress factors and financial performance of Kenyan Commercial Banks. It was recommended that bank’s need to ensure that their asset grows and find at what point their sizes.
Key words; Commercial Banks, Financial Distress Factors, Performance
CITATION: Chibole, K. W., Lyani, N. M., & Maniagi, M. G. (2022). The moderating effect of bank size on the relationship between financial distress factors and financial performance of commercial banks in Kenya. The Strategic Journal of Business & Change Management, 9 (4), 706 – 719.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i4.2443
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