| dc.description.abstract | This study had the objective of evaluating the relationship that exists between firm size
and financial performance. The effects of firm characteristics on firm performance have
gained attention in recent theoretical and empirical work. Firm size is a construct of
scholarly interest since it traditionally has much explanatory power, and an understanding
of its importance can be vital for managers who operate in today’s competitive
environments. Discussions of the role of firm size in explaining firm performance have
been ongoing in the fields of business organization and industrial economics. Early
research emphasizes the importance of scale economies and other efficiencies in larger
firms. This research was carried out using a correlational design. The target population of
this study was all the 43 commercial banks in Kenya as at 31st December 2012. The panel
data to be used was data from 1998 to 2012. This study used secondary data which was
collected from Central Bank of Kenya and bank themselves. Firm size was measured
using net assets , total loans , total deposits (measured in Kenya shillings) and number of
employees. Financial performance was measured using Return on Assets (ROA). Data
which was collected was analyzed using correlation and regression statistics. Analyzed
data was presented in tables. Study findings indicate that there is moderate correlation
between three of the studied factors of bank size which include total deposits, total loans
and total assets. The relationship between three of the independent variables, namely,
total loans, total deposits, and total assets and the dependent variable (financial
performance- ROA) of commercial banks were all found to be statistically significant.
Total deposits and total loans had relatively stronger effects on financial performance
compared to total assets. There was no significant relationship between number of
employees and financial performance for commercial banks in Kenya. The study
recommends that in order for commercial banks to increase their performance
(profitability) there is need from commercial banks to increase size by increasing various
aspects of customer base, net assets, deposit liabilities and market share. The
recommendations from the study include the need for bank policies that give greater
importance to the determination and monitoring of their loan portfolio, customer deposits
and asset quality. The study further recommends that for commercial banks to remain
profitable they should have good portfolio management which will help in making
decisions about investment mix and policy, matching investments to objectives, asset
allocation for individuals and institutions, and balancing deposits and loans against
performance. | en |
