Internal Factors, Bank Size, and Financial Performance of Commercial Banks in Kenya
DOI:
https://doi.org/10.53819/81018102t2540Abstract
This study sought to evaluate the effect of internal factors and bank size on financial performance of commercial banks in Kenya. Two objectives were identified and hypotheses developed. The internal factors were identified as; capital adequacy, asset quality, management quality, and liquidity. The study deployed bank size as a moderator. Explanatory research design was applied. Using panel data covering 13 years (2010-2022), secondary data were gathered of all the 38 commercial banks licensed in Kenya as at December 31st, 2022, from the annual published financial statements of commercial banks and from the Bank Supervision Annual Reports published by Central Bank of Kenya. Descriptive and inferential statistics analyses were deployed using Stata software version 17.0 and excel. Correlation and regression analyses were used to test the hypotheses. Tables and figures were used for data presentation. Based on the findings, the internal factors jointly and significantly contributed to financial performance of commercial banks. The influence of bank size was statistically significant. However, some internal factors (capital adequacy, management quality, and liquidity quality) did not contribute significantly to financial performance of commercial banks. The study recommends a strategic harnessing of internal factors by the management of commercial banks for optimal benefits. The research further proposes to the regulatory authorities the need to establish prudent controls and monitoring mechanisms that emphasises on CAMEL rating factors in assessment and ranking of banks. This study differs in scope by integrating bank size as a moderator and with a long period of coverage (13 years), a unique feature underexplored in most literature.
Keywords: Bank Specific Factors, Bank Size, Financial Performance, Commercial Banks
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