| dc.description.abstract | In any economy, the financial sector is the engine that drives economic growth through efficient allocation of resources to productive units. During the last two decades, the banking sector in Africa and in the rest of the developing world has experienced major transformation in its operating environment. Commercial banks play an important role in facilitating the economic growth. In the microeconomic level they represent the tool by which the government monetary policy is applicable. The study sought to establish the relationship between microeconomic variables and efficiency of commercial banks in Kenya. This study adopted a descriptive research design. The target population for this study was all the 44 commercial banks in Kenya as at December 2013. The research obtained absolute secondary data from commercial banks' audited financial statements, banks administrative report and from the Central Bank of Kenya (CBK) for the years 2008-2013. Data Envelopment Analysis (DEA) was used to measure technical efficiency of the commercial banks where coefficients were calculated from the most efficient commercial bank that have the ability to produce maximum output from a given set of inputs. In this research, intermediate approach of DEA was adopted. This analysis was done using SPSS (V 21) software and the findings presented in form of a tables and graphs to aid in the analysis and with which the inferential statistics were drawn. The study found that the four independent variables that were studied, explain 65.4% of the efficiency of the commercial banks in Kenya as represented by the adjusted R2. The study concluded that size, management quality and capitalization positively and significantly influenced efficiency of commercial banks in Kenya while credit risk adversely affected the efficiency of commercial banks in Kenya. The study concludes that size, management quality and capitalization positively and significantly influenced efficiency of commercial banks in Kenya while credit risk adversely affected the efficiency of commercial banks in Kenya. The study recommends that in future studies of microeconomic variables should be conducted in other sectors with less strict regulations on the privacy of audit reports and other relevant data for microeconomic variables. The study further recommends that there should be a policy set to standardize the presentation of financial statements commercial banks in Kenya. Further studies should be done on companies in micro finance institutions to find out whether the study will yield the same information | en_US |
