BASEL ACCORD REQUIREMENTS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Authors: Dr. Ruth Mathina, Dr. Ambrose Jagongo & Dr. Lucy Wamugo

ABSTRACT

The purpose of the study was to investigate the effect of Basel accord requirements on the financial performance of commercial banks in Kenya. The objectives of the study were to; determine the effect of capital on the financial performance of commercial banks in Kenya, to establish the moderating effect of market share on the relationship between Basel accord requirements and the financial performance of commercial banks in Kenya. The study was founded on asymmetry information theory, buffer theory of capital, and relative market power hypothesis. The study employed positivist research philosophy and causal research design. The target population for the study comprised all forty-three commercial banks operating in Kenya out of which thirty-eight were selected using a purposive sampling technique. The study found that capital had a positive significant effect on the financial performance of commercial banks in Kenya. Market share had a negative significant moderating effect on the relationship between Basel accord requirements and return on assets of commercial banks in Kenya. The conclusion of the study was that Basel accord requirements significantly explain the variation in the financial performance of commercial banks in Kenya. The study thus recommends that the central bank of Kenya should design banking policies for implementing Basel accord requirements and enhancing the financial performance of commercial banks in Kenya.

Keywords: Basel accord requirements, capital, financial performance, market share, commercial banks.

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