What question did this study set out to answer?

The study aims to determine how capital adequacy influences the financial performance of Tier II commercial banks in Kenya.

May 10, 2026Open Access

Asset-Liability Management and Financial Performance of Tier Ii Commercial Banks in Kenya

Key Points

The study aims to determine how capital adequacy influences the financial performance of Tier II commercial banks in Kenya.
Descriptive research design involving all eight Tier II commercial banks in Kenya as of December 31, 2023
Secondary data collected from KBA reports, Central Bank of Kenya reports, and financial statements since 2014
Data analyzed using descriptive statistics and inferential methods including correlation and regression analysis
Capital adequacy significantly improved return on equity (β = 0.021, p = 0.016 < 0.05), indicating well-capitalized banks perform better financially.
The study revealed that inefficiencies and weak internal controls negatively impact profitability.
Recommendations include proactive capital adequacy management techniques and enforcement of capital adequacy requirements by the Central Bank of Kenya.

Abstract

Abstract: The study's goal was to investigate how asset-liability management components, capital adequacy affected Tier II commercial banks' financial performance in Kenya from 2014 to 2023. The study's particular goals were to ascertain how capital adequacy affected the financial performance of Kenya's tier II commercial banks. Agency theory served as the study's guiding theory. A descriptive research design was used in the study. All eight of Kenya's Tier II commercial banks as of December 31, 2023, were included in the target population. The study made use of secondary data gathered from KBA reports, Central Bank of Kenya reports, and the audited and published financial statements of commercial banks since 2014. Data was analyzed using descriptive method inferential analysis. Descriptive analysis involved the use of means and standard deviation. Inferential analysis was done using correlation analysis and regression method. The analysis findings indicated that Capital adequacy had a positive and significant effect on ROE (β =.021, p =0.016<0.05), indicating that well-capitalized banks are better cushioned against shocks and sustain higher profitability. This highlighted the detrimental impact of inefficiencies, fraud, system failures, and weak internal controls on profitability. The study recommended tier II commercial banks to adopt proactive capital adequacy management techniques. The Central Bank of Kenya is recommended to continue enforcing capital adequacy requirements to improve resilience and safeguard financial stability. Keywords: Asset-Liability Management, Capital Adequacy, Financial Performance, Tier II Commercial Banks in Kenya, Return on Equity. Title: ASSET-LIABILITY MANAGEMENT AND FINANCIAL PERFORMANCE OF TIER II COMMERCIAL BANKS IN KENYA Author: Phelix Omondi Oywer, Dr. Joshua Matanda International Journal of Thesis Projects and Dissertations (IJTPD) Vol. 14, Issue 2, April 2026 - June 2026 Page No: 1-9 Research Publish Journals Website: www.researchpublish.com Published date: 07-May-2026 DOI: https://doi.org/10.5281/zenodo.20068207 Paper Download Link (Source) https://www.researchpublish.com/papers/asset-liability-management-and-financial-performance-of-tier-ii-commercial-banks-in-kenya

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