Relationship between management control systems and financial performance of commercial banks in Kenya

Abstract

The management control schemes act as a planning tool plus help to provide data that help to promote the allocation of resources and other decision making activities. When used in organizations the managing mechanism systems help companies to achieve their financial objectives and goals through maximizing the utilization of resources and avoidance of wastages. Commercial Banks can use the management control system models to promote, evaluate and boosts their fiscal performance. The main aim of this research was to establish the relationship between management control systems together with overall banking sector presentation. The study also intended to review the growing body of academic together with empirical researches that have tried over the years to look at the array of extent together with influence of systems of management control systems on commercial banks’ performance. The target population was all the 42 licensed commercial banks. Primary together with secondary data collection sources were used. Primary information was gathered for the management control systems using questionnaires and secondary data was collected for financial performance. It was a cross-sectional study, data was collected for several units of analysis over a uniform time frame. The study utilized descriptive statistics to gauge the existence of management control systems in the commercial banks. The research employed inferential statistics, which included correlation analysis together with multiple linear regression equation with the technique of estimation being Ordinary Least Squares (OLS) to create the association of management control systems and fiscal performance of commercial performance. The study findings revealed that the management control aspects are applied to high or very high extents in the commercial banks. Further study findings were that a management control system significantly affects financial performance and it can significantly predict financial performance but however, Continuous Improvement Process is the only management control system aspect that significantly impacts on financial performance. The study made recommendations to policy makers like the National Treasury and CBK and also commercial bank practitioners and consultants to institute management control systems to augment financial performance. Further recommendations was that particular focus should be made on the management aspect of Continuous Improvement Process in order to attain optimal fiscal presentation.