Factors Influencing Financial Performance of Commercial Banks in Kitale Town, Kenya

Abstract

The study aims at establishing the factors influencing financial performance of Commercial Banks in Kitale Town, Kenya. The study was guided by the following sPecifIC objective;to  establishing the influence of liquidity management on financial performance of Commercial Banks in Kitale. The study was important because it would assist Central bank of Kenya as the regulator in implementing supervision, to the government in determination and establishment of a stronger regulatory and legal framework for the Banking industry in Kenya.  This study adopted descriptive research design. The target population of the study was all the 14 commercial Banks operating in Kitale Town. Census was applied on all 42  employees from each bank which included the finance manager, business development manager and risk manager. This study used primary data specifically a structured questionnaire. The questionnaire comprised of both open and closed ended questions. Data was analyzed quantitatively and presented descriptively and illustrated by use of tables and charts. Descriptive statistics such as  percentages, mean, trends and standard deviation was computed to describe the characteristics of the variables of interest while in  inferential statistics, corelation, multiple regression analysiswas used to establish the nature and magnitude of the relationships between the variable and to test the hypothesized relationships. Coefficient of determination (R²) was used to measure the amount of variation in the dependent variable explained by the independent variable. All the analysis was done using SPSS statistical package. The results of data analysis were presented using figures and tables for easy understanding and interpretation. The study findings indicated that liquidity management had a positive and significant effect on financial performance. Results indicated that 95.1% of the variations in financial performancewas jointly accounted for by the variations in liquidity management. The study concludes that management liquidity management were statistically significant in explaining financial performance. The study recommends that commercial banks should invest in other lines of business for example product diversification and investments to supplement their income from core business. This will boost their stability and contribute to profitability.

Keywords: Liquidity Management, Banks Performance