Relationship between investment in intangible assets and financial performance of Commercial Banks in Kenya

Abstract

Commercial Banks in Kenya have undertaken strategic initiatives to improve financial performance. Some of these banks consider that the cumulative gains in efficiency are much greater over time than those, which come from irregular radical changes. However, many of these short- and medium-term gains are quickly eroded and absorbed into the industry standard and therefore cannot be depended upon as a prerequisite for survival and growth. The objectives of this study were to establish the relationship between computers fixed assets and financial performance of commercial banks in Kenya and to investigate the relationship between investment in intangible assets and financial performance of commercial banks in Kenya. Intangible assets comprise of capitalized computer software costs which are amortised over the estimated useful lives usually three to eight years according to generally accepted accounting principles and reported in line with international financial reporting standards. This research problem was best studied through the use of exploratory research design The study made use of secondary data when investigating and collecting both quantitative and qualitative data. The data collected presented through summarized percentages, proportions and tabulations. Mean scores and standard deviations were evaluated. The study concludes that the key variable being financial performance in 2006 is causing commercial banks in Kenya to increase investment in more intangible assets (computer software) and computer assets and equipment thus resulting in an increase in ROA and profitability as shown by the descriptive statistics.