The Impact of Market Risks on Market Capitalization Performance of Listed Commercial Banks in Kenya

Abstract

Capital markets play a very important role in capitalization efforts of listed firms or firms seeking to list in the securities exchange. They also serve as a veritable means of gauging the state and performance of the economy and consequently the investment climate. Rigorous market risk analysis by listed firms prior to issuing securities is important so as to optimize the performance of the securities. However, previous studies have not provided evidence to show whether market risk affects market capitalization of commercial banks. Therefore, the purpose of the study was to determine the influence of market risk on performance of market capitalization of commercial banks in Kenya listed in the Nairobi Securities Exchange. Descriptive study design was adopted for the study which also used quantitative methods. The target population comprised the three top executives in each of the 11 banks listed in the Nairobi Securities Exchange as well as 6165 branch managers. From these, a sample size of 98 branch managers was randomly selected for the study, 81 respondents completed and returned the questionnaires administered to them. Both descriptive and inferential statistics were used to analyze data with the aid of STATA statistical package. The study found evidence suggesting that market risk has a statistically significant effect on market capitalization performance of listed commercial banks in Kenya. The study recommends that the banks The study recommends that the banks should make securities issuing more sensitive to the market actors than the market itself so as to address the investor characteristics which are more deterministic of the investment decisions.