Board Characteristics and Capital Structure Decisions of Commercial Banks in Kenya

Organizations in the modern society are faced with numerous challenges that require those in charge with governance to make effective decisions that enhance organizations’ overall performance and sustainability. One of the key decisions an organization’s board ought to make involve capital structure. Despite various research that have been conducted relating to board characteristics and capital structure, several authors concurs that the manner in which banks select the best capital structure, and the factors that influence their corporate financing behavior are not well understood. The main aim of this study therefore was to investigate board characteristics and capital structure decisions of commercial banks in Kenya. The study measured board characteristics with respect to board size, board diversity, board independence and board expertise while the capital structure decisions was gauged with capital structure ratio, that is, total debt ratio. These dimensions also formed the specific objectives of the study. The study assessed various literatures covering both theoretical and empirical that elaborates on the study variables providing more insight as well as identified gaps that needed to be filled. The study employed correlation design as it strived to demonstrate the causative connection between study variables. All selected commercial banks formed the target population with chief finance officers and internal auditors being the target respondents in these banks. The primary source of information was both primary and secondary data of this study whereby primary data collection instrument was the questionnaire whose reliability and validity was ensured before collecting data. Collected data was properly assessed and checked before conducting final analysis. Data was analyzed using descriptive and inferential analysis, which was aided by statistical package for social science and the outputs were presented in form of graphs, pie charts, frequency tables and narrations. The findings of the study showed a strong positive correlation between all the study measures as shown by R value of 0.824. From inferential analysis findings, the study concludes that on the overall all the board of directors’ characteristics studied had a significant influence on capital structure decisions of commercial banks in Kenya. The regression coefficients p-values were 0.000, 0.000, 0.002 and 0.001 consecutively which were all less than 0.05 indicating a significant relationship between board characteristics dimensions studied and capital structure decisions; therefore, all the null hypotheses were rejected. The study also established that capital structure of commercial banks in Kenya over a period of 5 years between 2013 and 2017 averaged at 0.841 which was less than 1.00, indicating that these banks finance their assets using equity as opposed to debts. As a result, the study concluded that board characteristics have a significant impact on capital structure decisions made by Kenyan commercial banks. Furthermore, commercial banks in Kenya regard financial flexibility as more important than the tax shelter advantage, implying aversion to debt and a proclivity to follow an inverted pecking order when it comes to external funds. The study therefore recommends that banks’ board and management should manage debt and equity levels rationally to enhance their performance; banks should select the right size of board with the right mix of expertise and diversity who will be able to monitor the management but will not interfere with or infringe on capital structure decisions; banks should also increase board independence in order to benefit from the skills and expatriates of these board members; and finally a selection of banks’ board with divergent skills and qualifications so that banks can reap from the heterogeneity of educational backgrounds and competences.

Financial Leverage and Performance of the Energy and Petroleum Sector Companies Listed in the Nairobi Securities Exchange

Financial leverage and financial performance are fundamental issues in corporate finance. In Kenya, some companies listed at the Nairobi Securities Exchange have had performance improvement. However, most of them have experienced declining fortunes which has been attributed to the fact that corporate managers another practitioner lack adequate guidance required to attain optimal financing decisions. Financial leverage comprises of loans and other forms of debts where the proceeds from these loans are reinvested to earn higher return than the cost of loans. Financial use is the company's capacity to utilization of settled money related charges to amplify the impacts of changes in the profit before premium and duty on the company's income per share. The extent of obligation to value is a vital decision for corporate supervisors. The poor performance of Energy and Petroleum sector companies is of great concern. Financial leverage ranges from debt ratio, debt/equity ratio and interest coverage ratio which are vital since they directly affect the financial performance of firms. The general objective as to determine the effect of financial leverage on the financial performance of energy and petroleum sector companies listed in the NSE. While the specific objectives were; to establish the effect of debt ratio, debt -equity ratio and interest coverage ratio on financial performance of energy and petroleum sector companies recorded in the NSE. The research was anchored on the following theories: Modigliani-Miller theorem, Pecking Order Theory and Trade-off Theory. The empirical literature review was based on the three objectives of the study and gaps established. The study adopted a descriptive research design. Management of all the 5 energy and petroleum companies listed with the NSE was involved in the study which mainly used secondary data to conclude. Data was analyzed using regression analysis. Analyzed data was presented using tables. Confidence interval of 95% was used by the researcher. The study adopted a multiple regression model (Y = β0 + β1X1 + β2X2 + β3X3 +ε). The findings indicate that the independent variables Debt ratio, Debt to Equity ratio and interest cover ratio affected the financial performance of the firms in the Energy and petroleum sector. Their effect was up to 75.4%. Debt ratio and Debt to Equity ratio had a positive relationship whereas Interest cover ratio had a negative relationship to the firms in the Energy and petroleum sector listed in the NSE. This study recommends that the firms handle their capital structure decisions prudently as the changes in the factors like Debt ratio, Debt to Equity ratio and Interest cover ratio enhance profitability of firms when prudently employed and hence affect the performance of Energy and petroleum firms listed at the Nairobi Securities Exchange. This study also recommends that firms control the amount of interest expense since an increase in interest expense has an effect in that it reduces the financial performance of firms in the Energy and petroleum sector listed in the NSE.

Effect of Dividend Decisions on Market Performance of Share Prices for Commercial Banks Listed at Nairobi Securities Exchange

Dividend decisions are the approaches undertaken by the management of an organization to facilitate proper allocation of the cash flows from the business activities. They provide reasonable guidelines for the organization's actions based on the satisfaction of the investors' interests and organizational objectives. They strive to achieve the goals while they seek substantial profitability of the organization. The majority of the studies involving dividend decisions focused on determining the necessity for dividend policies in an organization. Others focused on assessing the Influence of the dividend policies on the stock return of the firm. Therefore, this study investigated the effects of dividend decisions on market performance of share prices for commercial banks listed at Nairobi Stock Exchange. The specific objective is; To determine the impact of dividend payouts on the stock performance of the commercial banks listed at Nairobi Stock Exchange The independent variables in the study is dividend payouts. The dependent variable was the performance of share prices for commercial banks listed at Nairobi Stock Exchange. The theoretical review included the bird in hand theory, information signaling theory, and tax differential theory. The research used a descriptive research design approach for 12 commercial banks' target population in Kenya. The study used secondary sources to collect data, which are the bank's annual data published on the Nairobi Stock Exchange website. The research used the SPSS software for analyzing the collected data. The results show that the constant dividend pay-out ratio and residual dividend policy are the major determinants of market performance of share prices. Discretional dividend policy does not significantly influence market performance of share prices of commercial banks. The study recommends the commercial banks to constantly make proper dividend decisions to ensure good market performance of the share prices.

Integrated Financial Management Information System Implementation on Financial Performance in Trans Nzoia County, Kenya

Public Finance Management Systems are generally used in the management of finance in the public sector. Although government is not necessarily a profit-making enterprise, sound financial performance is crucial to ensure the right services are rendered to the citizens as is required. Contextual investigations of progressively effective nations demonstrate that variables supporting fruitful execution of financial performance goals emanate from the significant specialists to budgetary change goals. The general objectives of this study was to assess the impact of integrated financial management information system implementation on financial performance in Trans Nzoia county, Kenya The specific objectives were; to establish the effect of IFMIS implementation on financial performance in Trans Nzoia County, to examine the benefits realised from IFMIS implementation on financial performance in Trans Nzoia County, to determine the challenges faced in the IFMIS implementation on financial performance in Trans Nzoia County and to investigate the level of awareness and satisfaction of the public about the IFMIS Implementation on financial performance in Trans Nzoia County. The study is anchored on technology acceptance Model, theory of budgeting and cost reduction theory. Data was examined by descriptive statistics such as mean, mode and median. The study also used inferential statistics such as regression and Pearson’s correlation coefficient. The results were statistically presented in forms of frequency distribution tables, charts and bar graphs. The SPSS (version 17) computer software was employed for analyzing data. The study found IFMIS to a great extent, is applied in Trans Nzoia County and there is huge enhancement for duty control and decreased change between spending arrangement and discharges. The greater part of the destinations of IFMIS have been accomplished including upgrading straightforwardness and responsibility, improving public use the executives, encouraging monetary control and limiting dangers. It was uncovered that, through IFMIS, Trans Nzoia County has had the option to build up useful institutional courses of action, create legitimate and administrative system, guarantee rivalry in offering and bolster inward control and responsibility control. The study concluded that there is in this way need to have limit assembling and improved terms of administration for public officials. The utilization of universal measures and strategies in macroeconomic examination, planning, bookkeeping, obtainment, and review requires talented staff that can apply new techniques in proficient way. Presentation of IFMIS and other mechanized framework requires explicit aptitudes and preparing for public officials.

Shared Service Centers and Financial Performance of Panafrican Equipment Group in Kenya

Modern firms have realised the need to take advantage of the opportunities in the emerging markets the concept of centralisation and co sharing of service providers gave rise to Shared Services (SS) and Shared Services Centres (SSC). However, little has been done in sub-Saharan Africa. This study sought to address this gap. For this reason, this study seeks to by determine the effects of shared service centres and financial performance of pan African equipment group in Kenya. The study specifically determined the effects of procurement shared services, finance shared services, inventory management shared services and ICT shared services on financial performance of Pan African equipment group in Kenya. The study was anchored on three theories namely: Transaction Cost Economics Theory, Resource Based View Theory as well as Agency Theory. The study adopted descriptive research design on 137 top-level management staff from the four sectors (mining & mineral processing, civil and infrastructure, power and energy and agriculture & forestry) of operating Pan African equipment group in Kenya. For selecting a sample of 86 participants, stratified random sampling method was used. Semi-structured questionnaires were used to collect primary data. The tool of studies was tested. The study used both face and content validity to assess the validity of the research tool while testing the accuracy of the research tool using the alpha (α) coefficient of Cronbach. The research considered a coefficient of 0.6 or more to be sufficient. Research information, including mean results, normal deviation and frequencies, was analysed using descriptive statistics. Analysis of conceptual material was also used for primary data analysis. Regression analysis was also used to analyse the effects finance shared services, inventory management shared services and ICT shared services on financial performance of Pan African equipment group in Kenya. Finally, the research considered ethical considerations where the permission to carry the study was obtained from the company and respective government bodies. The study concluded that Pan African Group significantly embraced procurement, finance, inventory management and ICT shared services. The study concluded that the firm by sharing procurement services it centralized and enhanced efficiency of purchases, pricing, supplier evaluation and quality control which contributed to peak performance. It was further concluded that to a significant extent finance shared services influenced financial performance of the firm. It was concluded that sharing of inventory management services at the firm enhanced effective and efficient inventory planning, costing, quantity and quality management and material optimization hence improving financial performance. It was concluded that database management, automation of processes, information security and network and facilities management services affected financial performance of the firm. It was recommended that enhancing more shared service centres will improve efficiency and effectiveness in service delivery and customer service.

Effect of Financial Technology Loans on Financial Inclusion Among the Unbanked Low-Income Earners in Makueni County

Financial inclusion is crucial in fostering individual prosperity, poverty eradication and stimulating economic growth. It is therefore a major policy concern for majority of governments across the world. Despite the rampant growth of financial technology in Kenya, the number of adults who are financially excluded is still high among the rural area residents. Lack of financial services access in rural areas has resulted to rural economic growth retardation and inequality. Further, financial exclusion has led to increased poverty levels because those excluded have been forced to depend on their limited savings to pursue their entrepreneurial interests. Small businesses have had no choice but to rely on their inadequate earnings to pursue viable business opportunities. The main objective of this study was to establish the effect of financial technology loans on financial inclusion among the unbanked low-income earners in Makueni County. Descriptive research design was used, with the target population being the unbanked low-income earners over the age of 18 in Makueni County. A sample size of 384 respondents was chosen using the convenience sampling technique. Personal interviews were conducted using an interview guide to collect primary data. The study found that fintech loans have a positive and significant effect on financial inclusion among the unbanked low-income earners in Makueni County. According to the findings of the study, since the unbanked people in Makueni County associate the use of financial technology loans to meeting personal financial needs and especially coping up with day-to-day expenses and emergencies, this study recommends that such people embrace the use of the fintech loans more as it will aid them in improving their financial lives to a greater extent. This is because for instance, by using the fintech loans, they can create employment for themselves and generate sufficient income by financing micro businesses using this credit.

Effect of Accounts Receivable Management on Financial Performance of Chartered Public Universities in Kenya

Accounts receivable refer to the payments expected by an organization in the foreseeable future. Accounts receivable management plays an integral part in the financial performance of higher learning institutions. With several public universities experiencing no or delayed payments from the respective receivable accounts, such institutions have been characterized with financial constraints, struggling to meet their immediate obligations. From reduced government capitation, lack of the module two students (Self-Sponsored), and students' non-compliance on fee payment policy, public universities in Kenya continue to experience poor financial performance due to inefficiency of their accounts receivable management. This study sought to examine the effect of accounts receivable management on the financial performance of chartered public universities in Kenya. The general and specific objective was to determine the effect of accounts receivable management on the financial performance of chartered public universities in Kenya. The study used the Cash Conversion Cycle (CCC) theory. Descriptive and inferential research designs were applied to analyze data. The target population was all the 31 chartered public universities in Kenya, and as such, the census survey method was adopted to collect data. Secondary panel data was extracted from the respective institutions’ audited annual reports for 2017, 2018, and 2019. The SPSS Version 25 was applied to analyze descriptive and inferential statistics. The study found that accounts receivable management had an indirect and significant effect on the financial performance of chartered public universities in Kenya (p= 0.000, β= -0.875). The study concluded that accounts receivable management has a substantial effect on the financial performance of chartered public universities in Kenya. The study recommended that in line with the IFRS 5 and IAS 1, respective university managements should develop optimal debts management frameworks to guide their financial management operations to realize sustainable financial performance both in the short and long runs.

Microfinance Reforms and Financial Inclusion in Kenya

Statistics indicate that about 1.7 billion people can’t access a savings account and slightly above 200 million small and medium-sized enterprises are deprived access to satisfactory financial solution. Kenya views microfinances as a development instrument for poverty lessening and economic growth through ensuring financial inclusion. It is due to the acceptance of this vital role of Microfinance that Kenya has undertaken strategic microfinance reforms and regulations aimed at promoting financial inclusion through microfinance business. The research’s general objective is to examine the effect of microfinance reforms on financial inclusion. Specifically, to determine the influence of microfinance transformation from non-deposit taking into a deposit-taking microfinance institutions on financial inclusion, to examine the association between microfinance board characteristics and public trust, to investigate the effect of microfinance licensing requirements on financial inclusion and to examine the effect of microfinance prudential standards requirements on financial inclusion in Kenya. The research adopted Financial Intermediation Theory and Public Interest Theory of Regulation. This research utilized descriptive research design and the population targeted included all the thirteen Microfinance institutions, which were licensed by the central bank of Kenya as at 2018. The study used purposive sampling to select six microfinance banks. Both descriptive and inferential statistics were done by use of multiple linear regression analysis. The research results indicated that microfinance transformation (pvalue=0.001), board characteristics (pvalue=0.042), licensing requirements (pvalue=0.035) and prudential standards (pvalue=0.002) significantly influenced financial inclusion. Results from regression analysis indicated a strong relationship between microfinance transformation, board characteristics, licensing requirements and prudential standards and financial inclusion. The study concluded that financial inclusion in micro financial institutions increases when there is sound microfinance transformation, board characteristics, legal requirements, and prudential standards. From the findings, the study recommended that micro financial institutions should support institutions reform functions and processes. Further the study recommended that micro financial institutions should recruit adequate and proficient workers and offer satisfactory training as well as certification for professional appreciation on strategies for microfinance reform processes and their influence on the financial inclusion of the micro financial institution. The research recommends that board members should be reliable and open so as to substantially contribute to financial performance.

Innovative Banking Practices and Financial Performance of Commercial Banks in Kenya

Commercial banks serve as key financial intermediaries in facilitation of the flow of money in the banking industry. Commercial banks offer credit to investment banks in order to offer investment opportunities for risky investments especially for financial securities using depositors’ money. Globally, banks are affected by broad difficulties in the operating environment. The banking industry has embraced innovation to sustain competitiveness. Financial innovations used by commercial banks revolve around the latest product, service and its conveyance to consumers. Consequently, this information influenced the research with its aim as; investigating innovative banking applications and monetary capability of banks. Particular goals included examining how; real time gross settlements (RTGS), electronic fund transfers (EFT), pay bill innovation in mobile banking and the extent of agency banking influence monetary potential of banks. Research anchored on the Schumpeter theory of innovations, the agency and bank-led theories. It was explanatory in nature and applied a census approach to gather information. The targeted group included commercial banks registered under the Central Bank totalling to 42 tiers 1. Raw and derived data was equally utilized including, financial statements and face to face interviews with top level managers. Collected information was examined by SPSS. Given conclusions were dispensed descriptively, and by inferring to statistical presentations. The resulting conclusion was that; when RTGS, agency banking, EFT, and mobile banking are solely brought up/down by a single unit, financial performance increased/ decreased by 0.163, 0.27, 0.197, and 0.318 units. At a constant however, financial performance remained at 0.236 out of 5 units. In conclusion, commercial in banks have significantly relied on innovative banking practices to shift their financial performance to new heights. The study has particularly placed both mobile and agency banking at a more central position in driving financial performance to the desired level than other factors including the RTGS and EFT. As part of the recommendations, managements of commercial banks should consider scaling up their adoption of RTGS, agency banking, EFT, and mobile banking as ways of reducing the operating cost of their respective banks reducing banking hall congestions since most of the frequently sought banking services can be achieved without one on one meeting with the bank tellers. Management should also consider adopting more innovative banking practices besides those this research investigated.

Effect of Various Categories of Government Expenditure on Economic Growth in Kenya

In Kenya, government expenditure has been changing tremendously in its composition and size. Noticeably, since Kenya’s independence, government expenditure has witnessed great expansion. However, the country has not achieved consistent economic growth for a long duration of time. Despite the increase in allocation of resources through increasing public spending, economic growth has not grown at the same rate. As such, economic growth did not consummate with the increase in allocation of resources through government expenditure. The study sought to determine the effect of education expenditure, defense expenditure, health expenditure and infrastructure expenditure on economic growth. It used an explanatory research design and secondary time-series data for the period between 1985 and 2018. Data on education expenditure, defense expenditure, health expenditure as well as infrastructure expenditure and economic growth was acquired from Kenya National Bureau of Statistics. The quantitative data was collected, edited and coded into Statistical software known as STATA version 14. Analysis of the quantitative data was based on descriptive as well as inferential statistics. Correlation analysis was employed to assess the strength of correlation between independent and dependent variables whereas regression analysis determined the weight of association between independent and dependent variables. Diagnostic test was performed to test for the regression model assumptions before carrying out regression analysis. The research focused on autocorrelation test, stationarity test, autocorrelation test, normality as well as heteroscedasticity test. The study revealed that education expenditure had a positive effect on economic growth in Kenya. The study found that defense expenditure had a positive effect on economic growth in Kenya. The results revealed that health expenditure had a positive effect on economic growth in Kenya. In addition, the study found that infrastructure expenditure had a positive effect on economic growth. The study concludes that government expenditure has a significant effect on economic growth in Kenya. The study policy implication of the study is that Kenyan government as well as policy makers should formulate policies and guidelines geared towards increasing education expenditure. This will help in ensuring adequacy in a trained, qualified and productive labor that is important in ensuring an improvement in economic growth. In addition, the government of Kenya should allocate at least 15 percent of their total expenditure to the healthcare so as to ensure a productive and healthy workforce. The government also needs to increase infrastructure funding as recommended by the World Bank to between 7 and 9 percent.