Managerial Synergies and Financial Performance: A Case of Selected Commercial Banks in Kenya
DOI:
https://doi.org/10.53819/81018102t4402Abstract
The financial performance of commercial banks in Kenya has been fluctuating over the last decade despite the significance of these financial institutions. The overall trend of financial performance (measured by Return on Equity in year 2018 to year 2022) has been inconsistent and largely erratic, with the lowest ratio recorded being 14.1% in 2018: this improved slightly in year 2019 then rose to 14.9% before dropping to 13.9% in 2020. The highest Return on Equity (at 25.6%) was recorded in the year 2022. Although the banking sector has documented growth in Assets, financial performance (in terms of Profitability) has been declining in the recent past. This decline has been mainly attributed to increased loan loss provisions, higher operating expenses, and reduced interest income. As a consequence of alterations in the operational environment, a number of commercial banks in Kenya have been compelled to bolster stability and augmenting financial performance. Hence, the study sought to assess the effect of managerial synergies on the financial performance of commercial banks in Kenya. The study was anchored on Theory of Misvaluation. The study adopted a positivist research philosophy and a causal/explanatory research design. The target population consisted of 13 commercial banks that had undergone mergers and acquisitions in Kenya over the 11-year time scope (2008-2019). The study was a census of the 13 Commercial banks; panel data was used-this was obtained from the audited financial statements, and Central Bank of Kenya supervisory reports. A data extraction tool was used to collect data. Using STATA software (version 14.0), data was analysed utilizing descriptive statistics, correlation analysis, and panel regression analysis. The study found that managerial synergies significantly affected financial performance (P = 0.001). The study concludes that a change in managerial synergies significantly affect financial performance of commercial banks in Kenya. In view of the findings, the study recommends that the managements of commercial banks should strive to make use of the policies concerning development by collaborating with the government and other stakeholders whenever possible, especially in education and training which are essential for the success of any business.
Keywords: Managerial synergies, financial performance, mergers and acquisitions, commercial banks and Kenyan banking sector.
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