dc.description.abstract |
The sustainability of a commercial bank is largely determined by its level of
performance.The banks must generate the necessary income in order to be able to
cover their costs of operations which are incurred as they go about their work. Over
the time banking industry has faced a lot of uncertainties which are mostly due to
technological innovations and the unstoppable forces of globalization; these changes
have continued to create expansion opportunities as well as challenges to bank's
managers to ensure their bank remain profitable and competitive.This study
investigated the moderating effects of bank ownership on determinants of financial
performance of commercial banks in Kenya. The objectives of the study were; To
examine the effect of capital invested on the financial performance of commercial
banks in Kenya, to determine the effect of credit risk on the financial performance of
commercial banks in Kenya, to establish the effect of interest fluctuation rates on the
financial performance of commercial banks in Kenya, to assess the effect of inflation
rate on the financial performance of commercial banks in Kenya and to assess the
moderating effect of bank ownership on determinants of financial performance of
commercial banks in Kenya. The study adopted explanatory research design. The
scope of the study was restricted to the assessment of the internal and external
determinants affecting bank profitability of the 44 commercial banks registered by
(CBK, 2014), with at least four years data for the years 2014, 2015 ,2016 and 2017.
Secondary data obtained from the commercial banks audit report was used as the
primary source of data. The completed data was then analyzed using descriptive and
inferential statistics in order to establish the relationship between the various
variables. Data analysis was done using STATA. Descriptive measures of mean,
standard deviation were applied to explain the data. Panel Regression analysis was
used to make statistical inferences and to test the study hypotheses. All the five
hypotheses of the study were rejected, the results obtained were as follows; Capital
Invested has a significant effect on the financial performance of commercial banks in
Kenya P= 0.000<0.05. Credit risk has a significant effect on the financial performance
of commercial banks in Kenya P= 0.030<0.05. Interest rates have a significant effect
on the financial performance of commercial banks in Kenya, P= 0.016<0.05. Inflation
rate has significant effect on financial performance of commercial banks in Kenya P=
0.009<0.05. The outcome of the moderated regression model showed that when the
moderating variable, bank ownership, was taken into account, only Interest Rates was
statistically significant P= 0.016<0.05 (p=0.016).The other variables that is; Credit
Risk, Inflation Rate and Capital Invested were found to be not statistically significant.
Various recommendations is making the main ones being Regulatory authorities
should develop effective policies on credit risk and inflation rate management to
ensure that banks are in a position where they can enhance their financial performance
as well as to handle negative shocks. The study also recommended that poor
performing banks increase their capital to ensure that their banks are efficient and to
maximize profits in the long run and growth of the banks. Therefore, in pursuit for
high financial performance and hence better financial performance of banks, the study
recommended that management work towards getting more loans customers. Through
this study, interest rates stood out as a key determinant of the financial performance of
commercial banks in Kenya. It is under this observation that the study recommends
further research on the optimum interest rate that will yield maximum financial
performance of commercial banks in Kenya. |
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