THE LINKAGE BETWEEN BANK RESTRUCTURING AND BANK DEPOSITS OF COMMERCIAL BANKS OPERATING IN KENYA

Bank restructuring and bank deposits are important concepts to commercial banks because of their role in the financial intermediation. Intervention through financial innovations, increasing the capital base to address the aspect of size and legal and regulatory framework review are important to ensure successful bank restructuring to record increased level of deposits. Commercial banks in Kenya have undertaken restructuring so as to be more competitive, to restore bank solvency and to mobilize more deposits. However, researchers on bank restructuring and bank deposits found conflicting results. The main objective of the study was to investigate the effect of bank restructuring on deposits of commercial banks in Kenya. The population of the study entailed all the 44 commercial banks licensed and registered under the banking act to do business in Kenya. Out of that data was availed from financial statements and annual reports of 39 commercial banks which were in operation for the period ranging from 2002 to 2014. Descriptive and inferential data analysis methods were used to analyze the secondary data collected. The empirical findings revealed that commercial banks use all the four types of bank restructuring which were financial, capital, operational and asset restructuring. It was further established that operational restructuring statistically affected bank deposits positively. Asset restructuring was found to have significant but negative influence on the deposits of commercial banks in Kenya. The research therefore, concludes that deposits can be mobilized through operational restructuring but can reduce significantly if there is asset restructuring. Deposits can therefore be increased through operational restructuring as an aspect of financial inclusion and financial deepening. KEY WORDS: Bank restructuring, capital, financial, asset, operational, bank deposits.

Research on the Signal Effect of Performance Compensation Commitment on the Impairment of Goodwill in China

This study using empirical research method and taking 1233 samples of A-share listed companies in China that completed major asset restructuring from 2007 to 2017, examines the signal effect of performance compensation commitment on goodwill impairment, and the impact of agency motivations on the signal effect based on the proportion of the performance compensation commitment that M&A targets achieve. I find evidence suggesting that the higher the proportion of the unfulfilled performance compensation commitment is, the higher the probability of goodwill impairment and the greater the amount of goodwill impairment. In addition, agency motivations affect the signal effect of performance compensation commitment on the impairment of goodwill. Specifically, for companies facing market return pressure and debt contracting pressure, the signal effect of the performance compensation commitment on the impairment of goodwill will be weakened. Furthermore, companies with performance loss have the incentive to use goodwill impairment to carry out a “big bath” and the loss motivation will lead to the overexpression of the signal effect of performance compensation commitment on goodwill impairment. The findings of this paper provide a new perspective for external users of financial statements to observe goodwill impairment and help them better understand managers’ opportunistic motivations to accrue goodwill impairment.

Mixed Ownership Reforms of China’s State-owned Enterprises

SOE mixed ownership reform has gained increasing prominence. In addition to government top-design policies, various pilot experiments have been carried out. Additionally, broader and more sophisticated methods are also employed, including stock market listing, capital and asset restructuring, and employee stock ownership plan. However, issues remain. The role of non-state parties that own part of the state firms is still poorly defined, thus their impact is uncertain. Government efforts to strengthen Party leadership have also dampened confidence of non-state investors.

Problems and prospects of management of investment attractiveness of subjects of business

On the basis of the analysis of the scientific views of researchers, the essential characteristics of the category of “investment attractiveness” as an object of management are specified. According to the results of the study of macroeconomic indicators (GDP, gross fixed capital formation, financing of capital investments, financing of innovations, direct foreign investments), the current problems of investment attractiveness in the country are determined. The investment attractiveness of Ukraine is analysed in accordance with the international indices. The sequence of investment attractiveness management of business entities is proposed, where priority is given to the strategies of the financial regulation by the development of business entities. The urgency of the formation of a financial regulation strategy based on an estimation of investment attractiveness is substantiated. The priority directions of increase of investment attractiveness in the framework of realization of the strategy of financial regulation by development of the business entities, which stipulate the choice of sources of financing, optimization of the structure of capital, asset restructuring and financing of innovations are determined.

CEO incentive pay around performance declines

Purpose The authors study stock and option grants around abrupt performance declines for continuing CEOs and find that firms facing abrupt financial declines grant more options than stock, while firms facing operational decline grant more stock than options. Firms making these adjustments just prior to performance declines outperform those that do not for three years following the decline and are less likely to engage in asset restructuring. To establish causality, the authors exploit compensation changes instigated by FAS 123R accounting regulation in 2005 that mandated stock option expensing. The result is robust to numerous tests, including rebalancing of incentives and CEO turnover. The paper aims to discuss these issues. Design/methodology/approach To establish causality, the authors exploit compensation changes instigated by FAS 123R accounting regulation in 2005 that mandated stock option expensing. Findings Firms making these adjustments just prior to performance declines outperform those that do not for three years following the decline and are less likely to engage in asset restructuring. The result is robust to numerous tests, including rebalancing of incentives and CEO turnover. Originality/value Several studies examine the relationship between poor performance and compensation of newly appointed CEOs. But firms regularly employ retention or incentive plans when experiencing distress to prevent critical employees from leaving when they are most needed (Goyal and Wang, 2017). Employee turnover results in a loss of continuity coupled with high search and training costs for replacement personnel. Beneish et al. (2017) find that 57 percent of CEOs associated with intentional misreporting retain their jobs, implying the costs of removing CEOs is high, especially if the incumbent CEO has a strong track record relative to industry peers prior to the period before the misreporting begins. The board fires the CEO if future firm value under the CEO is expected to be lower than under the best alternative CEO less adjustment costs (e.g. search costs, severance pay).

Intervening Effect of Financial Services on the Relationship Between Bank Restructuring and Financial Performance

Previous studies on the relationship between bank restructuring and financial performance reveal conflicting results with few studies establishing the effect of financial services. Few studies have investigated the causality between bank restructuring and financial performance as intervened by deposits and customer loans. The positivism research philosophy and descriptive and inferential causal research design were used in this study. The hypothetical view of the study was that the relationship between bank restructuring and financial performance of commercial banks in Kenya is not intervened by deposits and customer loans. The 39 commercial banks that were consistently in business for the period 2002 to 2014 were included in the study. Bank restructuring was disaggregated into financial restructuring, capital restructuring, operational restructuring and asset restructuring. The empirical findings were as follows: There was a significant direct association between bank restructuring and financial performance which was intervened by deposits and customer loans as proxies for financial services. Deposits were found to be significant in intervening the relationship between bank restructuring and financial performance. Customer loans on the other had was not found to significantly intervene the relationship between bank restructuring and financial performance. A composite variable of financial services denoting the aggregate of the intervention of deposits and customer loans showed a significant intervening effect on the relationship between bank restructuring and financial performance. The study outcome therefore reveals that the hypothesis that the relationship between bank restructuring and financial performance is not intervened by financial services is rejected. The conclusion is that banks should focus more on deposits to caution against a decrease in financial performance. Additionally customer loans should not be ignored since the intervention though insignificant tends to negatively influence financial performance. The implication is that when banks focus more on the provision of financial services they are likely to compromise financial finance possibly because of the increased costs associated with providing financial services. Regulatory institutions such as the Central Bank of Kenya (CBK) and the Kenya Institute of Bankers can use the study results to enhance policy and prudential guidelines to increase profitability of the banks. The study recommends that there is need to increase financial services offered by banks to increase outreach other than improving profitability of banks.

Turnaround Strategies and Their Influence on the Financial Performance of Organizations: A Case Study of Uchumi Supermarkets Ltd-Nairobi County Branches

Purpose: The main purpose of this study was to establish the influence of turnaround strategies on the performance of Organizations: A case study of Uchumi Supermarkets Ltd, Nairobi branches.Methodology: This study employed descriptive case study design. Uchumi supermarkets Ltd, Nairobi branches was the unit of study. This study purposively sampled 35 respondents from the 90 managers at all the management levels with equal representation. This was a 40% representation. This research was conducted through a case study to enable the researcher explore the matter in depth. Primary data was gathered by use of closed ended questionnaires, which were self-administered. A pilot study was conducted in order to establish the validity and reliability of data collection instruments. After data had been collected through questionnaires, it was prepared in readiness for analysis by editing, handling blank responses, coding, categorizing and keying into Statistical Package for Social Sciences (SPSS) computer software for analysis. SPSS was used to produce frequencies, descriptive and inferential statistics which were used to derive conclusions and generalizations regarding the population.Results: The study findings indicated that debt restructuring, change management, asset restructuring are positively and significantly related to performance. The results also indicated that debt restructuring explains 24.6% of performance of Uchumi Supermarkets Limited. The results also indicated that Changes in management explains 45.2% of performance of Uchumi Supermarkets Limited. The results further indicated that asset restructuring explains 21% of performance of Uchumi Supermarkets Limited. The results also indicated that staff rationalization explains 8.2% of performance of Uchumi Supermarkets Limited.Unique contribution to theory, practice and policy: The study recommended that organizations aiming to turnaround and improve their financial performance should include debt restructuring, change management and asset restructuring. . The study also recommends that Uchumi supermarkets limited should continue with the turnaround strategies like engaging human resource consultants to head hunt for key individuals for managerial positions, having structured and competitive salaries for key managerial positions and implementing performance based bonus pay programs for key staff because they lead to improved performance.