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Factors Affecting Financial Performance of Commercial Banks in Kenya
No full textCommercial banks are crucial in determining a nation's economic growth and stability. The study objective was to determine the variables that affect Kenya's commercial banks financial performance. ROA measurement of financial performance served as the dependent variable. The independent factors included bank size, managerial effectiveness, asset quality, liquidity, and capital adequacy. To explain the relationship between the dependent and independent variables, the study employed a descriptive research approach. The analysis was done using a multiple linear regression model with secondary data obtained from banks audited yearly financial statements. The findings revealed that the predictor variables accounted for 40.6% of changes in financial performance while 59.4% changes in financial performance could be explained by other internal factors not considered in this study. Additionally, it was established that AQ and SZ had a favorable impact on ROA, supporting the idea that a rise in AQ and SZ causes an increase in ROA. On the other hand, CA, LR and ME had negative effect on ROA leading to the conclusion an increase in CA, LR and ME leads to a decrease in ROA. The study recommended that the CBK adopt flexible policy to match the prevailing economic and market conditions in determining the minimum capital adequacy and liquidity ratios to caution banks from holding excessive capital and assets. A study on the impact of CAMEL indicators on financial performance including all commercial banks in Kenya was recommended because the study left out earning capacity as an internal factor.
Keywords: Financial Performance, Capital Adequacy, Asset Quality, Management Efficiency, Size & Liquidit
Asset Tangibility and Financial Performance: The Moderating Role of Economic Growth and Earnings Volatility
No full textThe Kenyan manufacturing sector’s contribution to the economy has been declining. It has stagnated at 10% of the gross domestic product (GDP), contributing to an average of 10% from 1964-1973 and marginally increased to 13.6% from 1990-2007 and has been below 10% in recent years further dropping to 8.4% in 2017 and 7.1% in 2020 ultimately hitting its lowest in 2022 of 7.2%. The government has renewed its efforts to revive the sector to grow its contribution to GDP to 20% by 2030. Asset tangibility is a significant determinant of how counterparties and external financiers value a firm and hence turn around its fortunes. This study applied Dynamic Unbalanced Panel analysis techniques using Secondary data for 10-year period (2010 - 2019) with the study population comprising of 9 listed firms. A census of the firms was done and resulted to 86 observations. Focus was on asset tangibility moderated by economic growth rate and earnings volatility on firm value which was proxied by Tobin’s Q and EVA. Pecking order guided the study. Longitudinal research design was used as it is appropriate when dealing with panel data. STATA version 15 was used for analysis. Model estimation followed a two Step System GMM testing the study hypotheses at 5 % significance level. Pearson correlation coefficient was used to show the strength and direction of association among the study variables. ATNG was positively correlated with Tobin Q (r = 0.4331) and LnEVA (r = 0.3683). The regression weights were also positive and significant. The study therefore concluded that asset tangibility is imperative as it directly determines the financial burden firms face in their operations and recommended that the managers of manufacturing firms need to consider project financing to limit exposure to credit risk. Future studies can consider a balanced panel analysis and other panel data econometric techniques.
Keywords: Asset tangibility, Firm Value, Financial Performance, Manufacturing firms
Investigating the Impact of Global Policy and Political Shifts on Vietnamese Businesses
No full textThis paper examines how Vietnamese enterprises in various industries, including oil and gas, transportation, and food, were impacted by the tensions between Russia and Ukraine during the first half of 2022. By utilizing statistical comparison methods, the study found that there were fluctuations in revenue, profit, and other indicators that measure business activity. Specifically, in the oil and gas industry, companies such as Vietnam Gas Corporation, Binh Son Refining and Petrochemical Joint Stock Company, and Ca Mau Petroleum Fertilizer Company saw higher revenue and financial ratios compared to the industry average, while other businesses experienced a decrease from the previous quarter. Transport companies benefited from increased import and export, as well as high freight rates and global price hikes for goods and materials. The food industry in Vietnam saw the Russia-Ukraine conflict as a significant opportunity for growth, but businesses still encountered challenges in capitalizing on this potential. As Vietnam's economy is deeply intertwined with the global economy, fluctuations and high inflation in the world economy can have an impact on the country's economy and businesses.
Keywords: Market Volatility, Political Tension, Vietnamese Enterprises, Russia-Ukraine Conflict
Foreign Debt Repayment Outflow and Securities Market Volatility in Nairobi Securities Exchange, Kenya
No full textThe study was undertaken to assess the effects of foreign debt repayment outflow on the securities market Volatility at NSE, Kenya. The connection between foreign loan repayment outflow and stocks market volatility has not been fully examined, despite being the subject of financial studies. Regarding how foreign debt repayment influences the volatility of the securities market, global empirical research has yielded inconsistent conclusions. The findings are contradictory, which calls for additional research to be done in the current study to determine how international capital outflow affects the volatility of securities traded at Kenya's NSE. The study utilized an explanatory research methodology and used secondary data to focus on the listed institution at the Nairobi Securities Exchange in Kenya. The impact of outflows of foreign debt repayment on the volatility of the securities market over the research period was evaluated using the census technique. Nairobi All Share Index, a gauge of securities market volatility, was negatively and significantly impacted by the outflow of foreign debt repayments. It was determined that less foreign debt repayment causes the NSE equities market to be more volatile. The study recommends that Policy makers may need to consider whether to intervene in the foreign exchange market to prevent excessive currency appreciation, adjusting interest rates, implementing fiscal stimulus or introduce financial regulations to stabilize the securities market.
Keywords: Foreign debt repayment outflow, Nairobi Securities exchange security market volatility
SASRA Prudential Regulations and Financial Performance of Deposit Taking Saving and Credit Co-Operative Societies in Kenya
No full textFinancial performance of Kenya’s deposit-taking savings and credit co-operative societies has been a source of concern, as evidenced by declining indicators over time. According to the SASRA study, profitability has declined significantly, as evidenced by a drop in Return on Assets (ROA) from 2.65% in 2020 to 1.59% in 2021. The purpose of this study was to investigate the effect of prudential requirements imposed by Kenya's Savings and Credit Cooperative Societies Regulatory Authority (SASRA) on the financial performance of Deposit Taking Savings and Credit Cooperative Organisations (SACCOs). The objectives of the study were to investigate the effect of liquidity, asset quality and capital sufficiency on and financial performance of deposit taking saving and credit co-operative societies in Kenya. The study was based on public interest theory, buffer theory and agency theory. The study employed a comparative research design and positivist research theory. The population studied in this study consisted of 175 licenced Deposit Taking SACCOs. Secondary data was used in the study, which was then analysed using descriptive and inferential statistics. Stata was used to conduct the analysis in this study. A multiple linear regression model was used to forecast financial performance. Diagnostic tests were performed to ensure that the linear regression model assumptions are not violated. The correlation results showed that liquidity has a negative correlation (-0.0497) with ROA. Capital adequacy showed a positive correlation (0.6710) with ROA. Similarly, asset quality had a positive correlation with ROA (0.5663). Panel regression results confirmed the importance of capital adequacy and asset quality in driving financial performance, as evidenced by highly significant coefficients (0.7140 and 0.2087, respectively) with p-values of 0.0000. The liquidity coefficient, on the other hand, was found to be -0.0008 with a p-value of 0.7380, indicating that changes in liquidity have a negligible impact on ROA. The study discovered that liquidity, capital adequacy, and asset quality explain 62.65% of the variation in financial performance (ROA). The study recommended that deposit-taking savings and credit co-operative societies (SACCOs) should take a balanced approach to liquidity management in order to optimise financial resources and potentially increase returns, and employ a solid capital base to improve stability.
Keywords: Micro Finance Institutions, Non-performing loans, Net Interest margin, portfolio at risk, capital adequacy
Effect of Accounting Ethics on Quality of Financial Reporting among Listed Commercial Banks in Rwanda Stock Exchange
No full textAccounting ethics is an important element for enhancing the quality of financial reporting in financial institutions because it requires bank staffs to exercise integrity, objectivity and professional competence and due care. This research examined the effect of accounting ethics on quality of financial reporting among listed commercial banks in Rwanda stock exchange. The objectives of the study were to investigate the effect of accounting integrity on the quality of financial reporting among listed commercial banks in Rwanda, to determine the effect of accounting objectivity on the quality of financial reporting among listed commercial banks in Rwanda and to examine the effect of accountants’ professional competence and due care on the quality of financial reporting among listed commercial banks in Rwanda stock exchange .Theories underpinning the study are business entity theory, going concern theory and agency theories. The study used correlation design with a quantitative approach. The sample size was 363 respondents who included accounting, finance and auditing staff, heads of departments and members of the boards of directors of the four selected commercial banks. However, only 203 (56% response rate) completed the survey. Stratified simple random and purposive sampling techniques were used to select this sample. Data was analyzed through descriptive analysis. Findings for the first hypothesis (H01) show that accounting integrity has a statistically significant effect on the quality of financial reporting among selected commercial banks in Rwanda (β=.196; p<.05). This suggests that holding other factors constant, accounting integrity contributes up to 19.6% of the variation in the quality of financial reporting. For the second hypothesis (H02), it is observed that accounting objectivity has a statistically significant effect on the quality of financial reporting among selected commercial banks in Rwanda (β=.591; p<.05). Regarding the third hypothesis (H03), findings show that professional competence and due care have no statistically significant effect on the quality of financial reporting among selected commercial banks in Rwanda (β=.140; p>.05). The study recommends strengthening professional knowledge and training by investing in continuous training and development programs. Promotion of ethical practices, enhancement of staff and management collaboration and learning culture across the surveyed commercial banks are also recommended. It is hoped that the study will enable the listed commercial banks to improve ethical practices and competences among staffs so as to enhance quality of reporting. Other academicians may also find the study valuable in benchmarking their studies on the same subject.
Keywords: Accounting Ethics, Quality of Financial Reporting, Commercial Banks, Rwanda Stock Exchang
Interest Rate Capping and Performance of Commercial Banks in Bangkok, Thailand
No full textInterest rate capping is a regulatory mechanism designed to limit the maximum interest rates that banks can charge on loans and credit products, with the primary aim of protecting consumers from usurious practices. However, this practice presents a complex challenge as it can impact the profitability of commercial banks by constraining their interest income. To thrive in this regulatory environment, banks should balance profitability concerns with the imperative to provide fair and accessible financial services to their customers while complying with interest rate caps. The study adopted the descriptive research design. The target population was 25 commercial banks in Bangkok, Thailand. The study did sampling of 20 respondents that were chosen from the target population of 25 commercial banks in Bangkok, Thailand. Questionnaires were used to gather the data. In conclusion, the relationship between interest rate capping and the performance of commercial banks in Bangkok, Thailand is a delicate balancing act. While interest rate capping seeks to protect borrowers and promote financial stability, it can also pose challenges to the profitability of commercial banks. The ultimate success of this regulatory practice hinges on the ability of banks and regulators to collaborate in creating a regulatory environment that safeguards the interests of consumers, maintains financial stability, and fosters a competitive and sustainable banking sector. The study recommended that Thailand should implement a flexible regulatory framework that allows for periodic reviews and adjustments of interest rate caps based on economic conditions. Commercial banks should focus on effective risk management, adopting advanced credit assessment tools and diversifying revenue streams through innovative financial products to mitigate the impact of reduced interest income. Additionally, promoting financial education and enhancing consumer protection measures will empower borrowers to make informed financial decisions while ensuring transparent lending practices in a regulated environment.
Keywords: Interest Rate Capping, Performance, Commercial Banks, Thailan
Internal Audit Operational Efficiency and Performance of Public Institutions in Rwanda: The Case of Ngoma District
No full textThis study aimed to investigate the impact of internal audit operational efficiency on the performance of public institutions in Rwanda, using a case study of Ngoma District. The study aimed to identify the main internal control activities, assess the role of internal audit operations in identifying and assessing risks, establish the effects of internal audit operations on ensuring compliance with laws, regulations, and internal policies, analyze the contributions of internal audit operations in detecting and deterring fraudulent activities, and find out the impact of an effective audit system on operational efficiency. The target population consisted of 120 staff working at the Ngoma District head office in Kigali, with 92 being a sample. Primary data was collected through structured questionnaires and secondary data from Ngoma District reports and online resources. The statistical analysis revealed several strong and highly significant correlations between internal audit operationalization processes and the performance of public institutions. There is a substantial positive correlation between the internal audit processes of File Verification, approval, and Authorization and the institution's ability to detect and assess risks. The study also demonstrates a significant correlation between computer system control measures in the internal audit process and an institution's ability to adhere to legal requirements, regulations, and internal policies. A strong and statistically significant correlation is found between the implementation of backup and file recovery procedures and the prevention of fraudulent activities, emphasizing the importance of data integrity and security in maintaining trustworthiness. Finally, the research reveals a robust and statistically significant association between staff monitoring and the operational efficiency of public institutions, underlining the critical role of accountability and supervision in streamlining processes and resource allocation. These findings emphasize the significance of comprehensive internal audit practices and controls in enhancing the performance, governance, and effectiveness of public institutions in Ngoma district.
Keywords: Internal Audit, Operational Efficiency, Public Institutions, Rwand
Impact of Electronic Tax System Implementation on Efficient Revenue Collection in Rwanda; A Study of Rwanda Revenue Authority Gasabo District
No full textRwanda Revenue Authority had in the recent past experienced low revenue collections and a weak and ineffective tax administration and collection system. This was believed to be due to manual administration system characterized by low tax collections and poor record keeping that made the Rwanda Revenue Authority not to meet its budgets. This research was conducted to ascertain the impact of electronic tax system implementation and efficient revenue collection in Rwanda. This research had three specific objectives namely, to analyze the effect of internet payment/filing on tax collection in Rwanda, to examine the effect of mobile payments on tax collection in Rwanda and to establish the effect of electronic billing machines on tax collection in Rwanda. The study was designed in a way that provided insight to the tax administrators and policymakers in the government on the way forward as far as making the system acceptable and friendly to the taxpayers. The research was undertaken in Rwanda Revenue Authority head offices in Kigali; with a time, frame of two months. The study used a descriptive research design with a survey population of 75 staff of the RRA. The population of the study included all the 75 staff sampled in Rwanda Revenue Authority hence a census approach was applied. The researcher used secondary data from the Rwanda Revenue Authority. Descriptive statistics, such as frequencies and percentages, were used to summarize and present the survey responses. Inferential statistical tests, such as regression analysis tests, were conducted to examine relationships and associations between variables. Qualitative data from interviews were transcribed and analyzed using thematic analysis. The themes and factors leading to the impact of electronic tax system on revenue collected were identified, summarized, and reported. This study was relevant because it embraced technological advancement tools that transform businesses. The government being a service provider is obligated to embrace technology in order to reduce operational costs in terms of stationery, and transaction costs and to enable taxpayers to be compliant anywhere in the world and at any time. The e-tax system was introduced at a time when the government was championing the digitization of its ministerial processes as a way of enhancing service delivery to the citizens hence the need to research in this area.
Keywords: Electronic Tax System Implementation, Efficient Revenue Collection, Rwanda Revenue Authority, Gasabo District, Rwand
Financial Risk and Shareholders Wealth of Deposit Taking Saccos in Nairobi City County
No full textSince 2010, DT-SACCOs in the country have struggled with poor financial performance due to financial risks and the inability to retain funds for capital growth, consequently failing to meet shareholder expectations for increased wealth. The general objective of this study was to investigate the effect of financial risk on the wealth of shareholders of DT-SACCO in Nairobi City County. The specific objectives of the study were to examine the effect of capital, credit, and liquidity risk on value of shareholders' wealth. The study also investigated the moderating influence of Sacco asset size. The study was anchored on four theories: stewardship theory, the buffer theory of capital adequacy, the shiftability theory of liquidity and the modern portfolio theory. The study opted for a positivist research philosophy over interpretivism and realism. This positivism approach facilitated a clear, empirical examination of causal relationships within a structured explanatory research design, targeting a specific population of 43 licensed DT-SACCOs. The diagnostic tests used comprise of normality, autocorrelation, homoscedasticity, stationarity, and multicollinearity. The data for this research was sourced from the Sacco Society Regulatory Authority and SACCOs reports covering 2011 to 2021. Analysis was conducted using Stata 16. Results of corelation reveal a positive association between capital risk and shareholders wealth, while credit risk was found to have a negative relationship with shareholders wealth. Liquidity risk had a negative relationship with the value of shareholders’ wealth. In addition, the DT-SACCO size showed a positive association in relation to shareholders’ wealth. Results of Panel regression analysis shows a positive and statistically significant association between capital risk and shareholders wealth of DT-SACCOs of Nairobi city county. The capital risk had a coefficient estimate of 1.1400 and its p-value is 0.00900. However, it can be noted that the credit risk did not significantly affect shareholder wealth. The results were indicated by a coefficient of -2.6600 and a p-value 0.6350 for this variable. Contrary, it was noted that liquidity risk affected shareholder wealth negatively by a coefficient of –5.7600 and p-value of 0. 0000. Firm size had a statistically significant moderating effect on the interaction between financial risk variables on shareholders wealth. The study recommended that SACCOs embrace effective capital risk management practices by adopting optimal risk-return balance, diversifying sources of capital and developing strong monitoring mechanisms for risks. In addition, the study recommends for SACCOs to develop comprehensive liquidity risk management policies, closely monitor liquidity adequacy ratio, and cash flow projections and diversify funding sources.
Keywords: Financial risk, capital risk, credit risk, liquidity risk, firm size, shareholder wealth, deposit taking SACCOs, Nairobi City County