EFFECTS OF BANK SPECIFIC GUIDELINES ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA: A CASE OF KENYA COMMERCIAL BANK, NAIROBI COUNTY.
Abstract
The objective of this study was to establish if there is a relationship between bank specific guidelines and financial performance of Commercial Banks in Kenya. Regulations are the independent variable while financial performance is the dependent variable. The study adopted a descriptive research design. Financial performance in this study was measured using two financial ratios; return on assets and return on equity. The population of study was 95 top management employees in the 19 branches of Kenya Commercial Banks in Nairobi County and the period of study was from 2013 to 2017. The study mainly used primary data. A pilot test was conducted in selected commercial banks in Kiambu County. The validity and reliability of instruments was ensured to enhance consistency. The data collected was coded, validated, and edited for accuracy, uniformity, consistency and completeness. The study then used Statistical Package for Social Science (SPSS 24) to analyze the quantitative data. A linear regression model of financial performance versus regulations was then applied to examine the effect of banking regulations on financial performance of commercial banks in Kenya. The study findings indicated that there is a positive and significant effect of loan management policies (Beta = 0.478, Sig = 0.000), liquidity management (Beta = 0.243, Sig = 0.000), capital adequacy (Beta = 0.324, Sig = 0.000) and management quality (Beta = 0.461, Sig = 0.008) on financial performance of commercial banks in Kenya. However, asset quality doid not have a significant effect on financial performance of commercial banks in Kenya (Beta = 0.101, Sig = 0.362). The study concluded that favorable bank specific regulations can positively improve the performance of commercial banks in Kenya. The study recommended commercial banks to come up with better policies to cope with the central bank of Kenya bank specific regulations in order to improve their performance.
Key Words: Loan Management Policies, Liquidity Management, Capital Adequacy, Management Quality, Asset Quality
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i4.937
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