Influence of Convertible Bonds on Liquidity Growth of Commercial Banks in Nairobi County Kenya

Abstract

Purpose: The purpose of this study was to investigate the influence of convertible bonds on liquidity growth of commercial banks in Nairobi county Kenya Methodology: This research applied descriptive research design when gathering data by closedended questionnaires on 39 commercial banks in Nairobi County Kenya and secondary data from commercial banks dating from 2016-2018. Overall operations managers, marketing managers and general managers were the respondents. Census technique was used. Pre-testing questionnaires was issued to branch marketing managers, operational managers and assistant managers in simple randomly selected five commercial banks located in Meru county Kenya. SPSS data analysis software was be consulted for quantitatively using the descriptive statistics such as mean, percentage and standard deviation. Tables, graphs and detailed explanations was used to present the final results of the study. Results: The study found out that there was a statistically significant positive relationship between convertible bonds and liquidity growth of commercial banks in Nairobi county Kenya. Convertible had an R value of .732 and an R square value of 0.536. This proved that convertible bonds predicted 53.6% of the changeability in the liquidity growth. The regression coefficients of convertible bonds had a β=.117, P=010 at 0.00 significance level. Unique contribution to theory, policy and practice: The discovery of presence of positive influence of convertible bonds on liquidity growth led to new knowledge contribution by the study. The study recommended that more types of customized bonds should be issued and public awareness should be raised. The study recommended that policies should be developed by government through the central bank whereby bank customers can obtain bonds more often just like the way mobile loan apps are common. This would promote more market for the bonds. Commercial banks should also indemnify various types of bonds with insurance firms so that any misfortune of events like the recent covid-19 pandemic would have minimal impact on the various types of fixed-rate bonds. The study contributed new knowledge when the relationship between corporate bonds and liquidity growth of commercial banks in Nairobi was established