The study sought to investigate the efficacy of capital adequacy ratios as predictors\nof financial distress in Kenyan commercial banks. The study was\nbased on a positivism research paradigm using a descriptive research design.\nThe population of the study was drawn from 43 commercial banks operating\nin Kenya over the period 2009-2015. Data were collected using data collection\nsheets from annual reports of commercial banks. Collected data were analyzed\nusing stepwise logistic regression. Hypothesis testing was done at 0.05\nsignificance levels. The study found that capital adequacy ratios were significant\npredictors of financial distress in commercial banks in Kenya. Core capital\nto total deposits: coefficient = 0.249 and P Value = 0.026, core capital to\ntotal risk weighted assets: coefficient = -0.419, P Value = 0.007 and total capital\nto total risk weighted assets: coefficient = 0.320, P Value = 0.017 were all\nsignificant predictors of financial distress in commercial banks. The null hypothesis:\ncapital adequacy ratios were significant predictors of financial distress\nwas accepted. The study concluded that capital adequacy ratios were significant\npredictors of financial distress in commercial banks. Consequently, the study\nrecommended that, there be introduced a continuous industry driven regulatory\nand reporting structure on capital adequacy for commercial banks.
Loading....