Determining the effect of information and communication on financial distress of unlisted banks in Kenya

The banking sector in Kenya plays a significant role in the economy. Banks provide financial services to the ever-growingbusinesses and act as the mediator of risk. Financial distress is a cause of concern for banks to adhere to their role. Financial distress is one major challenge and if left unchecked more often than not it causes banks to collapse. This study intends to determine the effect of information and communicationon financial distress of unlisted banks in Kenya. The study employed the theory of Asymmetry Information theory. The study used both primary and secondary data. Primary data was collected by closed ended questionnaires and secondary data was extracted from audited financial reports of all the 30 unlisted banks using data collection schedule.The study targeted all the 30 unlisted banks in Kenya for analysis. The unit of analysis was the bank manager, credit officer and the risk manager in each bank. The study therefore involved 90 respondents. A pilot study was conducted inKenya Commercial Bank, Cooperative Bank, and Equity Bank. The banks were randomly selected and they form 10% of the population under study. The study was done before the main study was conducted in order to test the reliability and validity of the research instrument. Content validity test was used to determine the validity of the questionnaires. Reliability was tested using Cronbach's alpha coefficient. Data processing was enhanced by the use of Statistical Package for Social Science (SPSS). Data analysis included both descriptive statistics and inferential statistics. Descriptive statistics included mean, frequency and standard deviation. Inferential statistics used correlation and regression analysis. The study findings indicated that information and communication had a positive and significant effect on financial distress of unlisted banks (β = 0.265, p< 0.05. The study was useful to the government and policy makers in enabling them understand and include relevant policies governing banking industry that effectively deter financial distress in unlisted banks. The study provided literature toserve as source of reference material for future scholarsin conducting further studies on financial distress of banks. The study recommended that banks employ appropriate preventive internal controls to deter financial distress in the banks.