School of Business & Public Management

Permanent URI for this collectionhttps://repository.kcau.ac.ke/handle/123456789/43

Browse

Subject: search.filters.subject.Operational efficiency

Search Results

Now showing 1 - 3 of 3
  • Thumbnail Image
    Item
    Bank size as a mediating mechanism between financial soundness and operational efficiency: evidence from Islamic banks in sub-Saharan Africa
    (Emerald Publishing., 2026) Njogo, Michael Njoroge.; Dallu, Abdallah Mambo.; Korir, Fiona Jepkosgei.
    Purpose This study examines whether bank size mediates the relationship between financial soundness and operational efficiency of Islamic banks in sub-Saharan Africa (SSA), where the sector remains small despite growing policy relevance. Design/methodology/approach Panel data from 35 Islamic banks (2010–2024) were analysed using bias-corrected Variable Returns to Scale scores from the Simar–Wilson two-stage Data Envelopment Analysis. A panel-based mediation model with two-way fixed effects was employed, with bank size (log of deposits) as the mediator. Findings Financial soundness significantly improves operational efficiency, with asset quality exerting a negative effect and earnings stability a positive effect. However, financial soundness does not significantly influence bank size, and bank size does not significantly affect efficiency once soundness is controlled for. Consequently, the mediation hypothesis is not supported, indicating that scale does not function as a transmission mechanism in SSA Islamic banking. Research limitations/implications The findings caution against consolidation-led efficiency strategies and support policy emphasis on governance, regulatory infrastructure and operational capacity building to enhance inclusive and sustainable Islamic banking development. Originality/value This study provides one of the first empirical assessments from SSA that explicitly tests the mediating role of bank size in the soundness–efficiency relationship. The findings show that scale expansion does not operate as a transmission mechanism, suggesting that scale-driven efficiency strategies may have limited applicability.
  • Thumbnail Image
    Item
    Catch-up or divergence? Operational efficiency convergence dynamics of Islamic banks in SSA
    (SSBFNET, 2026) Njogo, Michael Njoroge.; Korir, Fiona Jepkosgei.; Dallu,Abdallah Mambo.
    Abstract This study examines whether Islamic banks in SSA exhibit convergence in operational efficiency or whether performance disparities persist over time. Specifically, it evaluates whether less efficient banks catch up with more efficient peers within the region’s emerging Islamic banking sector. The study adopts a two-stage empirical framework using panel data from 35 Islamic banks across SSA over the period 2010–2024. In the first stage, operational efficiency scores are estimated using a bias-corrected Data Envelopment Analysis (DEA) model following the Simar and Wilson two-stage approach. An input-oriented specification under Variable Returns to Scale (VRS) is employed to reflect cost minimization behaviour and heterogeneity in bank size. Bias correction is implemented using a bootstrap procedure to obtain consistent efficiency estimates. In the second stage, convergence dynamics are analysed using sigma (σ) and beta (β) convergence models, alongside conditional convergence regressions incorporating bank size, age, and market concentration. The results reveal significant β-convergence, with the baseline model yielding a coefficient of −0.267 (p < 0.01), while the conditional model confirms robust convergence (β = −0.2836, p < 0.01), indicating that banks with lower initial efficiency improve at a faster rate than more efficient institutions, consistent with catch-up dynamics. However, σ-convergence results show that efficiency dispersion declined between 2010 and 2019 but increased after 2020, indicating that convergence was time-varying rather than uniform. This suggests that while convergence forces exist, structural differences and external shocks continue to sustain efficiency gaps across banks. The findings highlight the need for stronger regulatory harmonization, improved financial infrastructure, and targeted capacity-building initiatives to accelerate efficiency convergence across Islamic banks in SSA.
  • Thumbnail Image
    Item
    Effect of Fundamental Firm Characteristics on Operational Efficiency of Microfinance Banks in Kenya
    (International Journal of Finance and Accounting, 2022) Ondabu, Ibrahim T; Witila, Christian D
    This study seeks to examine the effect of fundamental firm characteristics on the operational efficiency of microfinance banks in Kenya. The independent variables were firm size, liquidity, leverage, cash reserves and asset tangibility. Descriptive research design was adopted, and study collected data from twelve (12) licensed microfinance banks in Kenya. This study adopted panel data regression model to analyse data with the assistance of STATA version 12. The analysed data was presented using tables and figures. The study found that firm size and asset tangibility had statistically significant positive effect on operational efficiency of microfinance banks in Kenya. The study further found that that liquidity, leverage and cash reserve had statistically insignificant negative effect on operational efficiency of microfinance banks in Kenya. The study recommends that microfinance banks should embrace asset tangibility on their strategic decision making and also that they can issue more debt as a strategy for more revenue generation. Also, the Central Bank of Kenya should formulate and enact a policy which makes commercial debt cheaper hence reduce cost of operations of microfinance banks so as to reduce interest rates in order to attract investors who will inject more funds into these financial firms. The study also recommends that microfinance banks ought to increase their network of branches countrywide to attract new customers to open new accounts and in so doing increase their deposits and that the Central Bank of Kenya should formulate policies that encourage microfinance banks to invest more in research and development and innovation so as to enable microfinance banks to design and develop competitive products or services that add value to the customers and which will foster their growth at large.