Effect of globalization on the financial performance of commercial banks in Kenya

Abstract

Globalization has been defined by the International Monetary Fund as the increasing integration of economies around the world , particularly trade and financial flows.The objective of the study was to examine / establish the impact of globalization on the financial performance of commercial banks in Kenya.The research design for the study was a descriptive design.The sample of this study consisted of all commercial banks in Kenya that have had complete set of data for the periods 2007-2012. According to the regression equation established, taking all factors into account (liquidity Ratio, Growth Rate of Gross Domestic Product, Debt Ratio, Financial Globalization Indices Return on assets and Return on equities measured by ROA and ROE will be influenced highly. The study found out that globalization have an impact on financial performance of commercial banks in Kenya, therefore it recommends that globalization indices i.e.interest rate deregulation, reduction of credit control, reduction of entry barriers and improvement of prudential regulation should be taken in to account by central bank and advice commercial banks the best way possible on how to minimize their effect on financial performance as they focus on maximizing profits and minimizing losses in a global market. The findings further recommends that commercial banks should always strive to adopt better global exercises such as corporate governance, technology and monitor foreign direct investments and capital flow in order to cope with globalization pace.