Effect of Firm Size on Financial Performance on Banks: Case of Commercial Banks in Kenya

Abstract

The Kenyan banking sector has undergone through intense shakeups in recent time. It was worth to look into which business models that banks should adopt in order to survive. The size of a firm plays a very crucial role in determining the nature of association between the functional atmosphere and external environment. The size of a firm matters in this new age of intense competition. The research sought to determine the effect of firm size on financial performance of commercial banks in Kenya. To obtain this objective, the study used a descriptive survey. The variables entailed; the number of branches, capital base, number of customer deposit and the loan and advances.The population of the study constituted all the 42 registered commercial banks in Kenya classified in to large, medium and small banks. During the fiscal year ended June 30, 2016, there were 42 commercial banks and 1 mortgage finance company. The data was gathered from the bank’s financial reports and central bank supervision reports for 5 years period from 2012-2016. This research was limited by the operating environment as it was characterized by risks and uncertainties due to its tumultuous nature of banking sector. The research made good use of secondary data; however, the researcher took note of their limitation in terms of rigidity and its historical nature. The study was affected by macroeconomic and microeconomic factors such as regulations and technology. The researcher increased the sample size of the source of data in order to increase the level of reliability and validity of the results. The result of the study is helpful to academicians, policy formulators, researchers, Investors and Customers and managers of organizations.