The Effect of Investment Strategies on the Value of Commercial Banks in Kenya
Abstract
The banking industry is so dynamic and competitive. A total of 10 banks control the entire
banking industry accounting for about 52.39 percent in market share. Although limited number
of banks generate huge amount of profits, stability of the whole banking system in Kenya has
been a challenge. This is evidenced by steps to place some of these institutions like Imperial
and Chase under receivership. The concerns about financial performance of Kenyan
commercial banks have raised attention by policy makers with regard to portfolio management.
Thus, the motive of this study was to bring out the link between investment strategies and value
of Kenyan banks. By leveraging descriptive research design with a focus on 42 banks, census
was embraced. Information was sought from first hand and auxiliary sources and means,
correlation and regression supported the processing of the information. SPSS version 24
helped in analysis and tables were utilized during presentation. It was established that although
commercial banks in Kenya had embraced active investment strategy (M=3.71), passive
investment strategy to a high extent (M=3.68), ladder investment strategy (M=3.63) to a high
extent, only active investment strategy (β=.061, p<0.05) and passive investment strategy (β=.042,
p<0.05) were significant. The study concludes that investment strategies have significant effect on firm
valued controlled by size. Among the recommendations was that finance and treasury managers of
the respective commercial banks in Kenya balance between active and passive investment
strategies in order to enhance the value of their banks. Shareholders and investors of the
commercial banks in Kenya should regularly observe the trends and remain relevantly
informed on how the value of their banks remains growing through maximization of the wealth.
The board of directors of the commercial banks in Kenya should carefully play their oversight
role on behalf of the shareholders to ensure that investment strategies put in place by the
management are geared towards maximization of the shareholder wealth.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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