An evaluation of financial performance of the kenyan banking sector for the period 1987 To 1999
Kathanje, Musa N
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This study set out to achieve the following three objectives: o To evaluate financial performance of the Kenyan Banking Sector during the period 1987 to 1999 using financial ratio analysis, o To determine whether the financial performance in the Pre Liberalisation period (1987- 1992) is significantly different from performance in the Post Liberalisation period (1993 - 1999), o To formulate a Performance Predictive Model for the Banking Sector using the data for the period under consideration. Secondary data obtained from financial statements and various publications was used in the study and data was analysed by use of Microsoft (Ms) Excel Statistical package. On financial performance evaluation of the Banking Sector, the study observed an improved performance over the period with better performance in the sector noted in the Post Liberalisation period. The performance in the sector as measured by (Z) was low in the Pre liberalisation period but improved thereafter. The result of the study led to the conclusion that liberalisation in the Kenyan Banking Sector positively influenced performance and was better for the economy. A discriminant analysis revealed that three financial ratios; Liquidity, Gearing and Earnings have the greatest influence on the sector's financial performance ." Based on the ratios computed in this study, a performance predictive model for the Commercial Banks and Non- Bank Financial Institutions was formulated using regression analysis. The model helped to explain the effects of performance ratios (Gearing, Liquidity, Earnings and Asset Quality) to Overall financial performance of each institution. This model can be used to signal performance trends in the sector paving way for a further detailed financial evaluation aimed at unearthing the financial problems in the respective institution. The models developed for the peer groups revealed that no significant difference exists among institutions in different peer groups. An institution in one peer group is as prone to failure as any other in a different peer group. The study is organised in five chapters as follows: Chapter one gives the introduction of the study by giving the structure of the Banking system, the background information, licensing procedures, powers of the Central Bank of Kenya, evolvement of the banking institutions in Kenya, statement of the problem, objectives of the study and significance of the study. Chapter two deals with the Literature Review by outlining the theoretical and structural frameworks. Research Design is outlined in chapter three dealing with the population and sample for this study, data collection techniques and data analysis. Chapter Four details the data analysis by discussing both trends and statistical analysis. Finally, conclusions, summary, limitations of the study and recommendations for further research are outlined in chapter five.
CitationMasters of Business and Administration,university of nairobi,2000
Faculty of Commerce,