| dc.description.abstract | The banking sector in Kenya plays a vital role in providing financial services, which
contributes to the economy's growth. Despite these contributions, commercial banks in Kenya
have faced extreme challenges in the last few years, which have been attributed to the banks'
financial instability. Due to this poor financial performance, the current study sought to
determine the effect of internal factors on the financial performance of listed commercial
banks at the Nairobi Security Exchange, Kenya. The study was based on following research
objectives: determining the effect of bank size, capital adequacy, and operational efficiency
on the financial performance of listed commercial banks at the Nairobi Security Exchange,
Kenya. The study is anchored on efficiency theory and signaling theory respectively. A
descriptive research design was employed. This study targeted all the banks quoted on the
Nairobi Security Exchange. It relied on secondary data obtained from financial statements
found on the websites of the relevant banks and the Central Bank of Kenya. Thus, the target
population comprised all 11 commercial banks listed at the Nairobi security exchange. Due to
a small target population, the study employed a census sampling technique where the sample
size was the 11 commercial banks listed in the Nairobi security exchange. Secondary data
was sourced from commercial bank statements and annual reports published in NSE between
2018 and 2022. The study presumed that data obtained from published annual audited reports
provided quality data, which addressed the study's validity issue. To enhance reliability, a
pilot study was carried out on two commercial banks that were not listed at the Nairobi
security exchange. The data was analyzed using descriptive analysis, regression analysis, and
correlation analysis, where the significance level was tested at 5%. The findings revealed that
firm size had posted a moderate positive statistically significant effect on return on asset
where the p-value was slightly > 0.05, capital adequacy had a strong and positive effect on
return on asset, and its p-value was < 0.05, indicating a statistical significance. And lastly,
operational efficiency indicated a positive and insignificant effect on the return on asset.
Operational efficiency had a p-value > 0.05. In general, it was established that 86.84% of
independent variables contributed to the financial performance of commercial banks listed at
the NSE. The study recommends that banks should seek to increase their asset to boost their
growth and maintain reasonable capital adequacy to absorb losses effectively. Lastly, banks
should effectively manage and control operational costs and expenses, thus maximizing
profits in the long run. The study recommends banks should seek to increase their assets,
which will foster the bank's growth in size and thus enjoy economies of scale. The study also
recommends that commercial banks and other financial institutions need to operate within
their capital standards. Further it is recommended that commercial banks need to maintain
reasonable capital adequacy to absorb losses effectively, which can emanate from economic
shock. Lastly, the study recommends that financial institutions must manage and control the
operation cost in order to be more efficient and maximize their profits. | en_US |
