Abstract: The main role played by commercial banks is financial intermediation, that is, the channeling of funds from extra to deficits units to facilitate production activities. However, the greatest risk faced by bank is loan default, also known as non performing loans. The upsurge in non-performing loans among banks in Kenya has been a source of worry to all stakeholders. This is because they lead to problems on banks’ assets as well as bank’s balance sheet, and have a negative consequence due to underlying loan losses provision. The study sought to establish the effect of capital adequacy and earnings non-performing loans of commercial banks listed at the Nairobi Securities Exchange, Kenya. Capital Buffer Theory and Efficiency Structure Theory were used. Causal design of research was relied upon. Research population comprises of the 11 (eleven) banks listed on the Nairobi Securities Exchange, Kenya where a census approach was relied on. The period that was considered in the study is from 2012 to 2017. The study concluded that capital adequacy had insignificant effects on non performing loans of listed commercial banks in Kenya. The study concluded that earnings had insignificant effects on non performing loans of listed commercial banks in Kenya. The study further recommends that banks should diversify their investments. Other than the traditional activities of lending, banks can also explore other business lines so as to curb the consequence of over reliance on lending.
Keywords: Capital Adequacy, Earnings, Non-Performing Loans, Commercial Banks.
Title: CAPITAL ADEQUACY, EARNINGS AND NON PERFORMING LOANS OF COMMERCIAL BANKS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA
Author: CATHERINE MWENDWA BAITUTI, DOMINIC NGABA, CHARITY NJOKA
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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