Internal Determinant Of Firm’s Security Returns On Commercial Banks Listed On Nairobi Securities Exchange

The market for securities improves the exchange of shares of public firms. Companies utilize the essential market to float shares to the public through an initial public offer in return for financed capital. A firm’s performance concerning equities is a solid marker of how it is fairing financially and its contribution to the macroeconomy. The equity market records are a sign of the monetary solidness of the economy. Thus, the current study sought to establish the influence of market determinants on stock market returns among listed commercial banks at Nairobi Securities Exchange in Kenya. In Kenya, such risks as liquidity risks, non-performing loans (NPLs), and poor performance, among others, have been of significant concern for quite some time. Many studies have been carried out in Kenya concerning the stock market performance of the banking sector. While there may be several factors, such as favorable government policies, explaining these performances, there is a shortage of information on the justification of strategic bank factors influencing the financial performance of these banks. Hence, the research sought to address hypothesis around the influence of the determinants such as capital adequacy, asset quality, management efficiency and influence of liquidity on stock market returns among Commercial Banks listed in Nairobi Securities Exchange. The research adopted credit risk theory, liquidity risk theory transaction cost theory, capital structure theory and signaling hypothesis theory. The study also applied panel data analysis and survey design on 10-year primary and secondary data from from 2013 to 2022. The target population constituted 11 commercial banks listed on Nairobi Securities Exchange. The study used quantitative data sorted and analyzed using descriptive and inferential statistical techniques. The descriptive analysis results were in the form of mean, standard deviations, frequencies, and percentage forms. Tables, diagrams, and charts were adopted. From the study findings, asset quality and management efficiency ratios had a negative and significant association with stock market returns respectively. On the other hand, capital adequacy and liquidity had a positive and significant relationship with stock market returns respectively. Based on the study results, the study recommends that banks should balance asset quality and lending stringency due to its negative correlation with stock returns. Strengthening capital adequacy and maintaining optimal liquidity positively impact stock market returns. In addition, a focus on service quality and employee morale is recommended for indirect benefits on stock performance.