EFFECT OF ASSET QUALITY ON FINANCIAL PERFORMANCE OF LISTED COMMERCIAL BANKS IN KENYA
EFFECT OF ASSET QUALITY ON FINANCIAL PERFORMANCE OF LISTED COMMERCIAL BANKS IN KENYA
Nicodemus Onchari Orando - MBA Student, School of Business and Economics, Kisii University, Kenya
Dr. Andrew Nyangau - Lecturer, Department of Accounting and Finance, Kisii University, Kenya
Dr. Asenath Maobe - Lecturer, Department of Accounting and Finance, Kisii University, Kenya
ABSTRACT
Dividend is a proportion of net income of the company paid to shareholders based on the number of shares held by them. Most companies mainly pay shareholders their dividends at the end of the accounting period while larger companies pay their dividends on quarterly basis. The purpose of this proposal paper is to establish the effects of dividend policy dimensions on the financial performance of commercial banks in Kenya. The decrease in ROE reached its lowest level of 19.8 % in February 2017 with ROA declined to 2.3 %. As at December 2017, ROA was 2.6 percent from 3.2 percent in December 2016 while the ROE was 20.6 percent from 24.4 percent in December 2016(Financial Sector Regulators Forum, September 2017). The general objective of the study was to establish the effect of dividend policy dimensions on financial performance of listed commercial banks in Kenya. The study was anchored on the following specific objective: to explore the effect of asset quality on financial performance of listed commercial banks. The study was supported by Bird in hand theory. The study adopted a descriptive design. The target population for the study was 12 listed commercial banks in Kenya. The study applied random sampling to select a sample size of 11 firms for the study. Secondary data was collected using data sheet form published annual report for five years (2017 to 2022). Data analysis was done using Descriptive statistics (mean, standard deviation) and inferential statistics correlation, simple and multiple Regression analysis. The study identified that, asset quality had a strong, positive and significant correlation with financial performance of listed commercial banks in Kenya. In addition, the study identified that, asset quality had a direct and significant effect on financial performance of commercial Banks in Kenya. Hence, asset quality led to an increase in financial performance of listed commercial Banks in Kenya. The study concluded that, asset quality had a strong, positive and significant correlation with financial performance of listed commercial banks in Kenya. In addition, the study concluded that, asset quality had a direct and significant effect on financial performance of commercial Banks in Kenya. Hence, asset quality led to an increase in financial performance of listed commercial Banks in Kenya. The study recommended that, listed commercial banks should increase assets quality especially those whose asset quality was below average through introduction of more stringent lending standards, using more valuable collateral facilities so that they reduce risk of loan loss and/ or default.
