Abstract: The sought to assess the relationship between firm characteristics and financial stability of tier three commercial banks in Kenya and Agency Theory, Capital Buffer Theory, Efficiency Theory and Structure Conduct Performance Hypothesis were adopted. Secondary data was collected from the websites of the commercial banks over a period of seven years that is from year 2013 to year 2019. Data was analyzed using descriptive statistics, pearsons correlation analysis and panel regression analysis. Hypotheses tests were performed at 0.05 level of significance. The study found that capital adequacy and management efficiency are significantly related with stability of tier three banks in Kenya at a p-value of 0.001 each. Bank size was found not to be statistically related with stability of tier three banks in Kenya a P-value of 0.191. The study also found that bank competitiveness is not significant to mediate the relationship between firm characteristics and stability of tier three banks in Kenya at a P-value of 0.026. The study concluded that adequate capital in a business and efficient management policies are key to sustaining stability of tier three commercial banks and therefore, the regulators and the management should ensure that policy guidance that affect positive capital adequacy and corporate governance are emphasized. The study also concluded bank size does not affect banks stability and therefore, a balance of investments should be done focusing more other important factors other than bank size.
Keywords: Firm Characteristics, Capital Adequacy, Bank Size, Management Efficiency, Bank Competitiveness and Financial Stability.
Title: RELATIONSHIP BETWEEN FIRM CHARACTERISTICS AND FINANCIAL STABILITY OF TIER THREE COMMERCIAL BANKS IN KENYA
Author: Kamau George Muhoho, Job Omagwa, Gerald Atheru
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Vol. 11, Issue 1, April 2023 - September 2023
Page No: 346-360
Research Publish Journals
Website: www.researchpublish.com
Published Date: 16-August-2023
