Effect of treasury management on the financial performance of Commercial Banks in Kenya
Gatimu, Teresia Wambui
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Treasury management importance cannot be underestimated particularly for sustained financial performance of commercial banks. The study was guided by risk management theory and liquidity preference theory. 43 licensed commercial banks in Kenya were studied to achieve the study objectives. Data was obtained from secondary data sources and primary data sources using a questionnaire. The findings were that four main treasury management practices were adopted by the commercial banks and included funding strategies, investment strategies, liquidity management and risk management. The treasury management practices studied were perceived to explain 67.6% of the financial performance of the studied commercial banks in Kenya. The number of significant treasury management practices reduced with increase in bank size. The study concluded that funding strategies, investment strategies, liquidity management and risk management strategies were the main determinants of financial performance among commercial bank. However, evaluation of the size of the commercial banks was concluded to be paramount during the formulation and integration of the treasury management decisions. The study recommended that treasury management practices should be a target mainly for small and medium commercial banks that seek to increase their financial performance. Additionally, the researcher recommended that the management of the banks should institute appropriate internal mechanisms to put mechanisms of having periodic and regular review of the treasury practices in line with their bank size. The study ensured originality in defining the research and adopted content where all sources were fully recognized. The study limitations included data collection confidentiality concerns and extracting of data from the financial statements due to varying reporting by commercial banks.