| dc.description.abstract | The purpose of the study was to examine the strategies applied by commercial banks in
Kenya to improve financial performance. This study was informed by interest rate capping
which necessitates commercial banks to seek other revenue sources and engage in lean and
efficient credit risk management. Specific objectives of the research study were to investigate
the influence of administration cost-concentration, credit policies, non-interest income and
asset quality on financial performance of commercial banks in Kenya. This research study
was based on the effectiveness hypothesis, arbitrage pricing theory, financial leverage model
and the symmetric information theory. The researcher used descriptive research
methodology. The 42 operational commercial banks in Kenya formed the population of
interest in this research study. Data for five years (2013 – 2017) was collected from the
audited financial reports of these commercial banks. Secondary data that was utilized to
achieve the study objectives was sourced from the Central Bank of Kenya bank supervision
reports, the audited financial statements of the commercial banks and the websites of the
commercial banks. This research study utilized panel data analysis where information for
each of the 42 commercial banks on ROA, administration costs concentration, credit policies,
non-interest income, asset quality and bank size was gathered for five years. Stata statistical
software was utilized for analysis. Presentation of data from the panel regression analysis was
through tables and figures. Study findings show that administration cost-concentration had a
significant positive effect on financial performance of commercial banks in Kenya (β=
0.4153; p < 0.05). Credit policies had a negative but insignificant effect on financial
performance of commercial banks in Kenya (β= -0.1872; p > 0.05). Non-interest income had
a significant positive effect on financial performance of commercial banks in Kenya (β=
0.1292; p < 0.05). Asset quality had a significant negative effect on financial performance of
commercial banks in Kenya (β= -0.9979; p < 0.05). From the study results, the study
recommends the following. On administration costs concentration, commercial banks should
seek to enhance their efficiency by leveraging on technology and reducing their operations
costs. Commercial banks should tighten their credit policies to ensure that only clients with
riskiness that is covered by the capped interest rates access loan products from the
commercial banks. Commercial banks should seek to perform other intermediation roles to
diversify their revenue sources so that they do not rely heavily on the ever-reducing interest
income. Lastly, management in commercial banks should be effective in controlling and
monitoring credit risk to achieve a higher credit rating. | en_US |
