Effect of Equity on Market Concentration among Commercial Banks in Kenya
Keywords:
Equity capital, Market concentration, Commercial banks, Financial stability, KenyaAbstract
Market concentration remains a key concern in the banking sector due to its implications for competition, financial stability, and systemic risk. In Kenya, a small number of large commercial banks dominate the market, raising concerns about the factors driving their sustained market power. This study examined the effect of equity on market concentration among commercial banks in Kenya. It was anchored on Agency Cost Theory, Information Asymmetry Theory, and Market Power Theory. A post-positivist research philosophy and a descriptive correlational design were adopted. The study targeted all 38 commercial banks licensed by the Central Bank of Kenya between 2019 and 2023. Both primary and secondary data were used; secondary data were obtained from published financial statements and Central Bank of Kenya reports, while primary data were collected from bank managers using structured questionnaires. Data were analyzed using descriptive statistics, correlation analysis, and regression analysis. The findings established that equity had a positive and statistically significant effect on market concentration (r = 0.687; β = 0.749, t = 19.843, p < 0.05), indicating that banks with stronger equity positions were more likely to command larger market shares. The results suggest that strong capital reserves, retained earnings, and shareholders’ equity enhance depositor confidence, support regulatory compliance, and strengthen the market position of large banks. The study concludes that equity is a critical driver of market concentration in Kenya’s banking sector and recommends that regulators develop proportionate capital policies that strengthen financial stability while promoting competitive balance.
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Copyright (c) 2026 Ismail Gurhan, Francis Gatumo, Albert Camus Bwire
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This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
