Effect of Assets Quality on the Financial Performance of the Commercial Banks Listed in the Nairobi Securities Exchange
Abstract
The objective of the study was to establish the influence of asset quality on the financial
performance of commercial banks listed at NSE in Kenya. The study utilized descriptive
research technique whereby secondary data was extracted from 12 commercial banks
annual financial reports between the years 2017 and 2020, the banking survey and the CBK
annual reports. Data analysis was performed by use of SPSS vs 26 software. The findings
of the descriptive statistics show that Loan Loss Ratio had a higher Mean (M=2.13)
followed by Total Investment to Total Assets Ratio (M= 1.63). Regression analysis using
Pearson correlation constant beta coefficient for LLR = 0.248, while p = 0.023 and TTR
beta coefficient value of -0.106 with p > 0.05. The results established that asset quality had
a significant effect on the financial performance of banks listed at NSE. The computed
linear relationship between the independent variables (asset quality) and the dependent
variables (financial performance) indicated that only 11% of the changes in the financial
performance could easily be explained by the independent variables. The study
recommends application of policies that should minimize credit risks as the nature of asset
quality provides specific variables that eventually influence the overall financial
performance of the banks
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1420]
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