EEFECT OF MICRO ECONOMIC FACTORS ON PERFORMANCE OF LISTED COMMERCIAL BANKS IN KENYA
Abstract
The performance of commercial banks plays an important role in the economic development of a country. The performance of commercial banks can be expressed or measured in various terms and these include competition, productivity, profitability, efficiency as well as concentration. The study seeks to establish the influence of bank specific variables on the performance of listed commercial banks in Kenya. The specific objectives included to determine the effect of capital adequacy on the performance of commercial banks in Kenya; to establish the effect of bank size on the performance of commercial banks in Kenya; to evaluate the effect of operating expenses on the performance of commercial banks in Kenya; and to assess the effect of total deposits on the performance of commercial banks in Kenya. The intermediation theory and liquidity theory were used in the study. The study adopted an explanatory research design. The target for the study was 43 commercial banks in Kenya. Out of these, the 11 listed commercial banks were sampled for performance over the past five years (2010-2015). Panel secondary data was utilized in the study. Data was analyzed using descriptive such as means, standard deviation and inferential statistics such correlation to show the strength of the effect between variables and regression analysis to depict the nature of the effect between variables. Results of the study revealed a positive and significant relationship between capital adequacy, bank size, total deposits and commercial banks performance while operational expenses had an inverse significant relationship with commercial bank performance. Commercial banks ought to continuously evaluate their capital adequacy, diversify their asset base and deposits accumulation strategies. Moreover, there is need for commercial banks to be innovative strategies which will minimize their operational costs.
Key Words: Capital Adequacy, Bank Size, Operating Expenses, Total Deposits, Performance of Commercial Banks
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DOI: http://dx.doi.org/10.61426/sjbcm.v4i2.465
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