20/02977

RESEARCH METHODOLOGY

CFU 3103

CLASS B

ASSIGNMENT 2

KCA UNIVERSITY

MAIN CAMPUS

DAY

29/06/2022
FACTORS INFLUENCING FINANCIAL PERFORMANCE AMONG
COMMERCIAL BANKS IN KENYA: A CASE STUDY OF COOPERATIVE
BANK KIMATHI BRANCH.

Statement of the Problem

An effective and well developed financial system helps to increase productivity and subsequently
the economic growth (Nkegbe & Yazidu, 2015). The banking sector is an important part in the
financial services sector providing unique financial services that significantly contribute to the
growth and development of every economy (International Labor Organization (ILO), 2018).
Commercial banks as the integral part of the banking sector plays a crucial role of promoting the
growth of economy by mobilizing savings and using the mobilized savings in financing the most
productive sectors of economic (Alkhazaleh & Almsafir, 2014). As such, a well performing
commercial bank is a boon for economic development and determining what factors influence
the same empowers not only to the management of these commercial banks but also to other
stakeholders and interest groups such as the country ‘s Central Bank and the government as a
whole to put in place measures to ensure both superior performance and sustainability of the
banks (Organization for Economic Co-operation and Development (OECD), 2017).

Most studies conducted in relation to bank performance focused on sector specific factors which
affected the entire banking sector performance. For instance, Comparative Studies of Foreign
and local banks in Thailand by Chantapong (2005) and the profitability of European banks: a
cross- sectional and dynamic panel analysis by Goddard et al. (2004). Also, Ongore and Kusa
(2013) studied the effects of various factors in banking sector performance in Kenya. The results
of the study showed that board and management decisions influence the performance of
commercial banks in Kenya and also that macroeconomic factors have insignificant influence on
their performance. This study however omitted the effects of industry specific factors on the
performance of commercial banks.

The scholarly evidence regarding factors influencing the financial performance of commercial
banks in Kenya with a particular focus on Cooperative Bank Kimathi Branch is available as it is
one of the branches of the Major Commercial Bank in Kenya; Cooperative Bank
This study sought to fill the gap of factors that influence the performance of banks in Kenya with
reference to Cooperative Bank Kimathi Branch to stir debate and discussion on improved
financial performance of commercial banks.

1.3 Objectives of the study.

1.3.1 General Objective.

My general objective is to determine the factors influencing financial performance among

commercial banks in Kenya; a case study of Cooperative Bank Kimathi Branch.

1.3.2 Specific Objectives

i) To examine how competition for clientele, influence the financial performance of

Cooperative Bank Kimathi Branch

ii) To analyze the influence of leadership on the financial performance of

Cooperative Bank Kimathi Branch.

iii) To determine how the source of funds, influence financial performance of

Cooperative Bank Kimathi Branch.

1.4 Research Questions

The study sought to answer the following research questions;

i) Does competition for clientele influence financial performance of Cooperative

Bank Kimathi Branch?
 ii) How does leadership influence the financial performance of Cooperative Bank
Kimathi Branch?

iii) How does source of funds influence financial performance of Cooperative Bank
Kimathi Branch?

Conceptual Framework

The conceptualized relationship of the research variables is shown in figure 2.1 below. The
study's independent variables are completion for clientele, leadership and source of funds while
the dependent variable being the financial performance of Cooperative bank Kimathi Branch.

INDEPENDENT VARIABLES DEPENDENT VARIABLE

Competition for clientele

Financial performance of
Leadership Cooperative Bank Kimathi
Branch

Source of funds

Figure 2. 1: Conceptual Framework

The prediction of Y was accomplished by the following regression model:

Y=β0 + β1X1 + β2X2 + β3X3 + Ɛ

Where:

Y = Financial performance of Cooperative Bank Kimathi Branch

X1 = Competition for clientele,

X2 = Leadership,

X3 = Source of funds,

β0, β1, β2, and β3 = Regression Coefficients for the independent variables

Ɛ = Error term, which was assumed to be normally distributed.