Determinants of strategy implementation and financial performance of Commercial Banks in Kenya

Abstract

Kenyan commercial banks have been performing poorly in the recent past as indicated by the placement of two mid-tier financial institutions under receivership. Further the industry has seen its revenue streams dim in the light of the recent execution of interest rate capping. Despite increased interest in examination of the financial performance of banks, the information concerning the effect of determinants of strategy implementation on bank performance is still limited and unreliable. This study aims to identify the effect of organization structure, resource capability and the management competency on the returns from financial institutions in the country. It was guided by three theories; the contingency theory, the management theory and the dynamic capabilities theory. The research relied on a descriptive research. The unit of analysis was the registered Kenyan commercial banks and 82 Chief Operating Officers and Chief Financial Officers drawn from the Kenyan banks. The study relied on both primary (Questionnaire) and secondary data (financial statements), data which was then compiled and coded into SPSS. The research utilized descriptive analysis (frequencies, means and standard deviation) and inferential analysis (correlation analysis, regression model and ANOVA model). The analysed data was presented using bar graphs, charts and tables. The research obtained an 84% response rate. Study results showed that there was positive significant correlation between organization structure; resource capability; management competency with regard to both the ROE and ROA of the financial performance of Kenyan commercial banks. The study concludes that the determinants of strategy implementation had a positive and significant effect on the financial performance of Kenyan banks. The study recommends that commercial banks should increase funds allocated for strategy implementation, and align their structure to the institutions goals while improving on the managerial decision making.