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

Joan Jebet, Joshua Matanda Wepukhulu


The study aimed to examine the effect of firm characteristics on the financial performance of commercial banks in Kenya by examining the effect of capital adequacy liquidity, credit risk and bank size on the financial performance. A descriptive research design was used in the study. The study focused on the 36 commercial banks which had complete dataset for the period 2013 – 2018. The study used secondary data acquired from the published yearly financial documents gathered from the Central Bank of Kenya. Analysis of the data was carried out using the STATA software. The relationship between independent and dependent variables was analyzed using descriptive statistics and panel data regression analysis while the strength between the variables was determined using correlation. The financial performance was measured using Return on Equity. Results on the regression models indicated that capital adequacy and bank size had a positive effect on the return on equity of the commercial banks in Kenya. Liquidity and credit risk were found to have a negative effect on the return on equity of the commercial banks in Kenya.

Keywords: Capital Adequacy, Credit risk, Liquidity, Bank Size, Return on Equity

DOI: 10.7176/RJFA/11-22-06

Publication date: November 30th 2020

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ISSN (Paper)2222-1697 ISSN (Online)2222-2847

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