dc.description.abstract | Risk-taking is an inherent element of banking and, indeed, profits are in part of the
reward for successful risk taking in business. However, excessive or poorly managed
risk can lead to losses and thus endanger the safety of a bank’s deposits. The
management of financial institutions should recognize measure, monitor and control
the overall levels of risks undertaken. The purpose of the study was to establish the
relationship between corporate liquidity risk and solvency of commercial banks in
Kenya. The study was anchored on; shiftibability theory liquidity, anticipated income
theory of liquidity, liquidity motive theories and financial economics theory. The
study adopted a descriptive research design. The population consisted of 43 licensed
commercial banks in Kenya and that had been in operation during the period 2012 to
2016. A census study was carried out therefore no sampling was done. The study was
facilitated by use of secondary data that was extracted from published financial
reports of the commercial banks, articles and papers relating to relationship between
between corporate liquidity risk and solvency of commercial banks in Kenya and fiveyear
period commencing 2012 up to 2016. The data collected was cleaned, coded and
systematically organized in a manner that facilitates analysis using the Statistical
Package for Social Sciences (SPSS). Quantitative analysis was used through
descriptive statistics such as measure of central tendency to generate relevant
percentages, frequency counts and mean where possible. The coefficient of
determination (R2) was used to measure the extent to which the variation in solvency
is explained by the corporate liquidity risk. F-statistic and t-statistics were also
computed at 95% confidence level to test whether there is any significant relationship
between variables of corporate liquidity risk and solvency of commercial banks in
Kenya. The study found that leverage with a coefficient of 0.823, liquidity risk with a
coefficient of 0.723; firm size with a coefficient of 0.812, capital adequacy with a
coefficient of 0.576 and operation efficiency with a coefficient of 0.673 were
positively and significantly related to the Solvency of Commercial Banks. The study
concluded that leverage had the greatest effect on the Solvency of Commercial Banks
followed by firm size then liquidity risk then operational efficiency while capital
adequacy had the least effect to the Solvency of Commercial Banks. The study
recommends that bank managers should take note of the fact that the size of the banks
influences their solvency, that the management of commercial banks should to
formulate strategies to be adopted in order to militate against liquidity risks for a
better financial performance and a need for Commercial banks in Kenya to increase
their short term assets it was revealed that increase in banks liquidity positively
influence the solvency of the banks. | en_US |