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Prediction of Financial Distress of Listed Commercial Banks in Tanzania and Kenya: A Comparative Study

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Sustainable Education and Development

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Abstract

The main objective of the Study is to predict financial distress of the listed commercial banks in Kenya and Tanzania. we employed fifteen (15) listed commercial banks from Kenya and Tanzania. Study period covers 2014–2018. Multi Discriminant Analysis (MDA) was adopted to consolidate all ratios measuring the critical aspects of Banks’ financial health. Findings revealed that none of listed commercial banks has been in safe financial health over the study period. Comparatively, the financial health of CBK was relatively higher compared to its peers, while NMB ranks the second. Significant growth of sales, total assets, EBIT and retained earnings contributed mainly to the performance of CBK and NMB. In contrast, stagnation in working capital and an increase in total liability affected the financial health of commercial banks. The result holds that in 2015 commercial banks required close monitoring to make sure they are not financially distressed, while in the subsequent years there was no significant improvement in the financial health, which implies the risk of being under financial distress was increasing. The Study recommends that the management of listed commercial banks should focus on the effective management of working capital and its components as it plays a very important role in day-to day activities and operating cycle of the bank. The natural extension of this research should focus on the use of the alternative model of bankruptcy predictions to confirm the validity of the findings of this Study

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Author information

Authors and Affiliations

  1. Department of Accountancy, College of Business Education, P. O. Box 1968, Dar es Salaam, Tanzania

    O. J. Ally

  2. Department of Accountancy, College of Business Education, P. O. Box 2077, Dodoma, Tanzania

    K. M. Bwana

Authors
  1. O. J. Ally
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  2. K. M. Bwana
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Editor information

Editors and Affiliations

  1. University of Lagos, Lagos, Nigeria

    Joseph N. Mojekwu

  2. Department of Construction Management and Quantity Surveying, University of Johannesburg, Johannesburg, Gauteng, South Africa

    Wellington Thwala

  3. Faculty of Engineering and the Built Environment, University of Johannesburg, Johannesburg, South Africa

    Clinton Aigbavboa

  4. Cape Coast Technical University, Cape Coast, Ghana

    Lawrence Atepor

  5. Kwame Nkrumah University of Science and Technology, Kumasi, Ghana

    Samuel Sackey

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Ally, O.J., Bwana, K.M. (2021). Prediction of Financial Distress of Listed Commercial Banks in Tanzania and Kenya: A Comparative Study. In: Mojekwu, J.N., Thwala, W., Aigbavboa, C., Atepor, L., Sackey, S. (eds) Sustainable Education and Development. Springer, Cham. https://doi.org/10.1007/978-3-030-68836-3_34

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  • DOI: https://doi.org/10.1007/978-3-030-68836-3_34

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-68835-6

  • Online ISBN: 978-3-030-68836-3

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