Effects of Capital Adequacy on the Financial Performance of Listed Commercial Banks at the Nairobi Security Exchange, Kenya

The study's main focus was on the effects of capital adequacy on the financial performance of listed commercial banks at the Nairobi Security Exchange, Kenya. The study was based on signalling theory. A descriptive research design was employed. The study targeted 11 commercial banks listed at the Nairobi security exchange, where the census sampling technique was adopted. Secondary data was sourced from commercial bank statements and annual reports published in NSE between 2018 and 2022. The study presumed that data obtained from published annual audited reports provided quality data, which addressed the study's validity issue. To enhance reliability, a pilot study was carried out on two commercial banks that were not listed at the Nairobi security exchange, and they were selected randomly. The data was analyzed using descriptive analysis, regression analysis, and correlation analysis, where the significance level was tested at 5%. The findings revealed that capital adequacy had a strong and positive effect on Return on assets, and its p-value was < 0.05. The study recommends that banks should seek to increase their asset to boost their growth and maintain reasonable capital adequacy to absorb losses effectively