Relationship between Determinants of Internal Performance and Stock Returns among Listed Commercial Banks in Kenya
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 10
Abstract
This research explored the relationship between determinants of internal performance and stock returns among listed commercial banks in Kenya. Guided by Signaling Theory, correlational research design was used, targeting eleven listed commercial banks in Kenya. Secondary data covering a ten-year time span Financial Year 2006/2007 to Financial Year 2015/2016 was collected from annual financial reports which were acquired from the Nairobi Securities Exchange, listed commercial banks and the Central Bank of Kenya databases. Descriptive and inferential statistics were utilized as a part of analyzing the collected data. The discoveries of the correlations and the regression analysis uncovered that the capital adequacy had a negative correlation for dividend yield of (r= -0.074, p> 0.01) and the regression results was (β= -0.039, t= -0.454, p>0.651) for the estimate of stock returns dividend yield. Asset quality had a positive correlation for dividend yield of (r= 0.372, p<0.01) and the regression results was (β= 0.388, t= 4.561, p<0.000) for the estimate of stock returns dividend yield. Management efficiency had a negative correlation for dividend yield of (r= -0.186, p> 0.01) and the regression results was (β= -0.127, t= -1.499, p>0.137) for the estimate of stock returns dividend yield. Earnings quality had a negative correlation for dividend yield of (r= -0.401, p< 0.01) and the regression results was (β= -0.344, t= -3.915, p<0.000) for the estimate of stock returns dividend yield. Liquidity had a positive correlation for dividend yield of (r=0.227, p>0.01) and the regression results was (β= 0.180, t= 2.048, p<0.043) for the estimate of stock returns dividend yield. The examination concluded that earnings quality and asset quality each had a major influence on stock returns among listed commercial banks in Kenya. In light of the discoveries and conclusions, the study investigation suggests that banks employ the composite CAMEL framework with an in-depth analysis to identify and act upon those ratios that add to the profit maximization of shareholders wealth and going beyond the minimum regulatory standards as provided by the Central Bank of Kenya with the point of improving quality option and money related soundness. The study recommends that, different investigations ought to be done to establish out the relationship between determinants of internal performance and stocks returns among the private commercial banks.
Authors and Affiliations
Peter Kipkogei Koech, Gilbert arap Bor, Peninah Jepkogei Tanui
Keywords
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- EP ID EP412997
- DOI 10.9790/487X-2010015260.
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