The Effect of Capital Structure on the Financial Performance of Commercial Banks in Kenya

Abstract

The objective of this research is to determine if capital structure does have any effect on the financial performance of commercial banks in Kenya. In most cases, it is expected the capital structure of a firm should have some effects on the performance of commercial banks. The study was conducted on 35 commercial banks in Kenya which were in operation in Kenya for the five years of study from 2008 to 2012. The various ratios of these commercial banks were computed from the various data collected from the data extracted from their financial statement for the period. The data was then analyzed using linear regression models using SPSS19 to establish if there is any significant relationship of capital structure and the financial performance of these commercial banks. The finding of the analysis concluded that there is no significant relationship between the capital structure and the financial performance of commercial banks in Kenya. There was very minimal effect which is negligible and therefore it was concluded that there is no relationship between capital structure and financial performance of commercial banks in Kenya.