EFFECT OF SHAREHOLDERS-CREDITORS ASYMMETRIC INFORMATION ON NON-PERFORMING LOANS IN COMMERCIAL BANKS IN KENYA
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Abstract
This study investigated the effect of shareholders-creditors asymmetric information on non-performing loans in commercial banks in Kenya. The study also looked into the moderating effect of bank size on the relationship between shareholders-creditors asymmetric information and non-performing loans. A descriptive survey research design was adopted in the study. The population of the study was the 39 commercial banks. The study used dividend payouts as proxy for measuring shareholders-creditors asymmetries information. Proxy for measuring non-performing loans was taken as non performing loans to total loans and Bank size measured by logarithm of total assets was used as moderating variable in the study. Secondary data for analysis were obtained from financial statements of commercial banks and central bank of Kenya supervisory reports. Normality test was confirmed using skewness and Kurtosis tests. Time scope was 10 years from 2013 to 2022 as the period is recent and there was enough data available and reliable for the study. Geographical scope was the 39 Commercial banks licensed and operating in the republic of Kenya. The research established that shareholders-creditors asymmetric information does not have significant relationship with non-performing loans. The results however confirm that Bank size has moderating effect in the relationship between shareholders-creditors asymmetric information and non-performing loans.
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References
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Curak, M., Pepur, S., & Poposki, K. (2013). Determinants of non-performing loans–evidence from Southeastern European banking systems. Banks & bank systems, (8, Iss. 1), 45-53.
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Gabrieli, S., & Georg, C. P. (2014). A network view on interbank market freezes.
Galindo, A.,Miller,M.,2001.Can Credit Registries Reduce Credit Constraints? Empirical Evidence on the Role of Credit Registries in Firm Investment Decisions. Inter-American Development Bank Working Paper, Washington.
Gambacorta, L., & Mistrulli, P. E. (2004). Does bank capital affect lending behavior?. Journal of Financial intermediation, 13(4), 436-457.
Garren, S. T., & Osborne, K. M. (2021). Robustness of T-test Based on Skewness and Kurtosis. Journal of Advances in Mathematics and Computer Science, 102-110.
George, D., & Mallery, P. (2010). SPSS for Windows step by step : A simple guide and reference, 17.0 update. Allyn & Bacon.
Ghasemi, A., & Zahediasl, S. (2012). Normality tests for statistical analysis: a guide for non-statisticians. International journal of endocrinology and metabolism, 10(2), 486.
Gosset, W. S. (1908). William Sealy Gosset. Biographical Encyclopedia of Mathematicians, 1, 239.
Gottlieb, D., & Moreira, H. (2015). Simple contracts with adverse selection and moral hazard. The Wharton School Research Paper, (78).
González-Uribe, J., & Osorio, D. (2014). Information sharing and credit outcomes: Evidence from a natural experiment.
Gropp, R., & Vesala, J. (2004). Insurance, Moral Hazard and Market Monitoring. ECB Working Paper 302.
Hammond, P. J. (1989). On the impossibility of perfect capital markets.
Hasan, M. S. A., Manurung, & Usman, B. (2020). Determinants of bank profitability with
size as moderating variable. Journal of applied finance and banking, 10(3), 153-166.
Hassan, S. U., Sabo, B., & Aliyu, I. A. (2023). Moderating effect of bank size on the
relationship between interest rate, liquidity, and profitability of commercial banks
in Nigeria. Gusau Journal of Accounting and Finance, 4(1), 96-120.
Hart, O. (2017). Incomplete contracts and control. American Economic Review, 107(7), 1731-52.
Hill, C.W. and Jones, T.M. (1992) Stakeholder-Agency Theory, Journal of Management Studies, 29, 131-154.
Huljak, I., Martin, R., Moccero, D., & Pancaro, C. (2020). Do non-performing loans matter for bank lending and the business cycle in euro area countries?.
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