Moderating Effect Of Market Power On The Relationship Between Bank-Specific Characteristics And Profitability Of Commercial Banks In Kenya
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Date
2025-09
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Publisher
IOSR Journal of Business and Management (IOSR-JBM)
Abstract
Commercial banks are essential for the Kenyan economy since they make significant contributions to its growth
and development. Empirical data from the Central Bank of Kenya shows that the commercial banking industry
has experienced fluctuations in profitability for the period covering 2013 through 2023 despite the bank-specific
factors being in line with regulatory expectations hence, the effect of such factors on bank-profitability remains
an issue for further investigation. Accordingly, the purpose of the study was to determine the moderating effect
of market power on the relationship between bank-specific characteristics and profitability of commercial banks
in Kenya. The study was anchored on the Profit Maximization Theory. A Census Design was adopted, which
involved 39 banks licensed and regulated by Central Bank of Kenya for the period covering 2013 through 2023.
Given the outcome of panel regression analysis, the study established that the interaction between bank-specific
characteristics (bank size, capital adequacy, liquidity, and asset quality) and market power was negative and
statistically significant in prediction of profitability (β=-.026, p=.000). Accordingly, the study recommends that
commercial banks should focus on customer service and innovative financial solutions that have the potential to
promote organic growth as opposed to their overreliance on market size as the main driver of performance.
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Citation
Mwali, N., Omagwa, J., & King’oo, R. N. (2025). Moderating effect of market power on the relationship between bank-specific characteristics and profitability of commercial banks in Kenya. IOSR Journal of Business and Management (IOSR-JBM), 27(9 Ser. 6), 08–13. https://doi.org/10.9790/487X-2709060813