Impact of short-term debt-asset ratio on the financial performance of commercial banks.

Abstract

This study investigated the impact of short-term debt-asset ratio on the financial performance of commercial banks. Descriptive research design allowed the researcher to collect data that describes the debt financing practices. The target population were commercial banks and in particular, 43 commercial banks domiciled in Nairobi County and have been in operation from 2004 – 2022. The study employed census due to the relatively small size of the population. Secondary data was utilized, which was acquired from the annual financial statements and reports published by the 43 commercial banks listed annually. The data was analyzed using Statistical Package for Social Scientists (SPSS) software version 23. Descriptive statistics, such as frequency distribution tables, percentages, and pie charts, was used to analyze the quantitative data. Pearson Correlation Analyses was utilized to investigate the relationship between the independent variable of banks' debt financing and the dependent variable of banks' financial performance. Furthermore, linear regression was employed to examine the dimension of the independent variable and the dependent variable. It was found that short-term debt-asset ratio was satisfactory (M=3.54, SD = 1.19), and financial performance (M=3.28, SD = 1.28). The study recommended that Commercial banks in Nairobi County Kenya should continuously formulate measures that sustain their accounts payables because this will lead to increased returns on assets.