Effect of Selected Internal Factors on Financial Performance of Commercial Banks in Kenya
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Date
2019Author
Wafula, Camelyne A
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
The banking sector in a nation plays a significant character in the distribution of economic
resources and thus contributes to the growth in the economy through the provision of resources
to lenders and the deepening of finance in the nation. From the finding, the financial
performance of a bank is critical not only for the investors, but also for the entire economy of a
nation and interdependent countries. The aim of the study was to determine the internal
influences affecting the financial performance of commercial banks in Kenya. Explanatory
variables of the study representing inner factors comprise of liquidity, bank size, loan
advancement and financial risk. The financial performance of commercial banks was evaluated
by the return on capital. The research was based on a descriptive research design and the study
population was 40 commercial banks in Kenya. The research used secondary information from
the financial statements of commercial banks for the period 2014 to 2018. Data from 30
commercial banks with data available for the five-year investigation period were analysed using
descriptive measures of mean and standard deviation. The results of the study illustration that
there is a constructive and important relationship between the liquidity, cost-income ratio and the
commercial banks financial performance in Kenya with p-values of 0.04 and 0.01
correspondingly.
In addition, credit risk and organisation size had a constructive relationship with financial
performance, although the relationship was negligible since their p-values were smaller than the
cut-off point. Nevertheless, the loan advances were found to have a destructive and negligible
relationship with the quality of commercial banks in Kenya. Considering the combined influence
of the variables on the financial performance of the banks, the cost-income ratio had the highest
positive influence, while the company scale had the least positive impact. The study found that
the combined effect of the variables on the performance of commercial banks was 11.4%.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1432]
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