The Determinants of Commercial Banks Profitability in Kenya (1983-2012)
Abstract
This research paper examines some of the key determinants of commercial banks’
profitability in Kenya. The first objective of the study was to determine the effects of
bank-specific factors on the profitability of commercial banks in Kenya. The second
objective was to determine the effects of macroeconomic factors on profitability of
commercial banks in Kenya. The study employed a time series data analysis technique to
achieve the above objectives. The study used data from annual Bank Survey Reports
from CBK and Economic Survey Reports from KNBS for the period 1983 to 2012. A
multiple linear regression model was employed to obtain the desired results. The analysis
showed that both bank-specific factors and macroeconomic factors have statistically
significant impact on profitability. Based on the results and findings, the study
recommends policies that would encourage capitalization of banks, reduce costs of their
operations, and minimize on the credit risk and liquidity holding while harmonizing the
long term effects of the macroeconomic factors. The study therefore, provides additional
knowledge about Kenyan commercial banking sector profitability that is important for
policy making.
Citation
Degree of Master of Arts in EconomicsPublisher
University of Nairobi School of Economics
Description
A research paper submitted to the school of economics,
University of Nairobi, in partial fulfillment of the
Requirements for the award of the degree of master of
Arts in economics