BSSF Research Projects (2018)
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Browsing BSSF Research Projects (2018) by Subject "Financial economics"
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- ItemEmpirical corporate probability of defaults in Kenya: Merton and modified KMV framework(Strathmore University, 2018) Mukesh, Bharadva, DarshaA firm's capital structure gives it an endogenous cause to default. Be that as it may, prior to default there is no way to precisely single out the firms that will default from those that will not. At best, we can only make a probabilistic assessment of the likelihood of default. Not to mention, depending on a firm 's choice of capital structure, the probability of default varies from a firm with a low financial leverage to one with a high financial leverage. This paper used the Merton Model to determine the probabilities of default in various sectors of Kenya and their relationship with varying debt tenors. The model generated high default probabilities for firms with a high leverage indicating that firms with a high leverage bear high financial risks. Furthermore, the default probabilities increased as the debt maturity increased signaling an increase in future uncertainty. Nonetheless, caution must be taken when interpreting the results since the Merton model carries assumptions that are at odds with reality. These assumptions can be relaxed and alternative modeling techniques can be employed in order to match real world situations. This can be a possible future research agenda.
- ItemA Study on the effect of capital adequacy on financial performance of commercial banks in Kenya(Strathmore University, 2018) Kamaita, Sheila NkirotePrudential soundness in the financial system is ensured through better self -regulation of factors such as capital adequacy, management quality and asset quality. Capital adequacy as a bank specific factor revitalizes the functioning of the banking system by acting as a buffer for losses during an economic downturn yet at the same time its use in projects leads to substantial returns. This study seeks to assess the extent to which capital adequacy affects the Return on Equity and Return on Assets for commercial banks in Kenya. A regression analysis using STAT A software was performed for the panel data collected from 6 commercial banks in the NSE from 2007- 2016. The results from the analysis show that a. unit increase in CAR increases ROE by 0.0558141 and increases ROA by 0.2033251. Based on the findings, capital adequacy plays a vital role in the financial performance of commercial banks. This implies that banks should hold more capital to buffer them against economic downturns and for better financial performance