RELATIONSHIP BETWEEN MACROECONOMIC FACTORS AND PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

Every organization that hopes to achieve its objectives must prioritize performance. An organization's performance is attributed to its ability to find and use the resources required for operational processes in obtaining a competitive advantage over its competitors. The goal of this study was to see how macroeconomic conditions influence commercial bank performance in Kenya. The causal research design was utilized to determine the relationship between the independent variables of GDP, interest rate, exchange rate, and inflation rate, and the dependent variable of performance. For the period 2009-2018, secondary data was gathered from the audited financial statements of Kenyan commercial banks, the Kenya National Bureau of Statistics, and the Central Bank of Kenya. A multivariate panel regression model was used in the study. According to the findings, interest rates and exchange rates had positive and negative statistically significant relationships with commercial bank financial performance. According to the study's findings, interest rates and exchange rates influenced commercial bank performance, however the GDP and inflation had little impact on commercial bank financial performance in Kenya.

Keywords: Macroeconomic Factors, Inflation, Gross domestic Product, Foreign Exchange, Return on Assets (ROA), Performance.

CITATION: Ndungu, J., Mwangi, J. K., & Githinji, M. (2022). Relationship between macroeconomic factors and performance of commercial banks in Kenya. The Strategic Journal of Business & Change Management, 9 (4), 811 – 820.