Abstract
The main purpose of the research was to establish determinants of commercial bank growth. The specific objectives of the study was to; determine the effect of default rate on loans on growth of commercial banks, determine the effect of level of interest income on growth of commercial banks and to establish the effect of forex transaction volume on growth of commercial banks listed in Nairobi Securities Exchange. The study was guided by the interest rate theory, international fisher effect theory and time preference theory. Using multiple regression analysis, we found support for the proposition that loan default rate, interest rate and forex transaction had a significant effect on growth of commercial banks. Keywords: Growth of commercial bank, default rate on loans, interest income and forex transaction volume DOI : 10.7176/DCS/9-1-06
Highlights
Growth is organizational outcome that resulting from the combination of firm-specific resources, capabilities and routines (Nelson and Winter, 1982)
3.0 DATA AND METHODOLOGY 3.1 Research Design The study used a descriptive design since we focused on getting inferences from the findings on the effect of default loans rate, interest income and the effect of forex transaction volume on growth of commercial banks listed in Nairobi Securities Exchange, Kenya
5.0 Discussions and conclusions This paper focused on three key issues: First is whether default rate on loan affects commercial bank growth, whether Interest income affects commercial bank growth and lastly whether forex transaction volume affects www.iiste.org commercial bank growth
Summary
Growth is organizational outcome that resulting from the combination of firm-specific resources, capabilities and routines (Nelson and Winter, 1982). A firm’s growth opportunities are highly related to its current organizational production activities (Coad, 2009). Commercial bank growth is uncertain because of environmental conditions such as competition and market dynamics. Determinants of an organization or firm is classified into three dimensions: individual, organizational and environmental determinants (Baum et al, 2001). The fundamental tenet of investment theory and the traditional view of monetary policy transmission is that a rise in interest rates has a negative effect on firm capital expenditures which will eventually effect its growth. Commercial banks are facing challenges in terms of maximizing shareholder wealth due to the volatility in interest rate dynamics
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