Corporate Restructuring and Financial Performance of Commercial Banks in Kenya
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Date
2024
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Publisher
Kenyatta University
Abstract
Financial performance is crucial in the realm of finance, and explaining why two organizations operating in the same environment perform differently remains a significant concern. The COVID-19 pandemic has posed a substantial challenge to firms, necessitating strategic responses to survive in the market. Consequently, corporate restructuring has become a common strategy among commercial banks in Kenya. Despite these efforts, banks reported a decline in financial performance in 2020. The objective of this research was to assess the effect of corporate restructuring on the financial performance of commercial banks in Kenya. The specific objectives were to: determine the effect of loan restructuring on financial performance, establish the effect of non-interest income restructuring on financial performance, determine the effect of financial technology restructuring on financial performance, and establish the moderating role of bank size on the relationship between corporate restructuring and financial performance of commercial banks. The study was grounded in four theories: Technology Acceptance Model, Financial Intermediation Theory, Agency Theory, and Profit Maximization Theory. A causal research design was adopted, targeting the 38 commercial banks operating in Kenya as of 31st December 2020. Secondary data was collected sing a data collection instrument and document review guide, sourced from the Central Bank of Kenya. The data covered a period of two years (January 2020 to December 2021) and was collected on a quarterly basis. Descriptive statistics and panel regression analysis were sed for data analysis, with diagnostic tests such as normality, multicollinearity, heteroscedasticity, autocorrelation, and Hausman specification tests conducted to ensure the validity of the regression analysis. The findings indicated that loan restructuring, non-interest income restructuring, and financial technology restructuring had a positive and statistically significant effect on the financial performance of commercial banks in Kenya. However, the study found that bank size does have a moderating effect on the relationship between corporate restructuring and the financial performance of commercial banks. The study concludes that corporate restructuring significantly impacts the financial performance of commercial banks in Kenya. It recommends that banking institutions enhance their se of technology, develop secure banking applications with robust security measures, and tilize technology to analyze personal information related to creditworthiness. Additionally, commercial banks should diversify their operations to improve financial performance.
Description
A Thesis Submitted To The School Of Business, Economics And Tourism In Partial Fulfillment Of The Requirements For The Award Of Degree Of Master Of Science In Finance Of Kenyatta University, July, 2024