Influence of Regulatory Enforcement on the Relationship Between Strategic Decisions and Performance of Commercial Banks in Kenya
Abstract
In any country, commercial banks play an important role in the economic resource
allocation by channeling funds from depositors to investors continuously. To do so, they
need to generate necessary income to cover their operations and these calls for effective
strategic decisions to be adopted by the bank management. The banking business at the
same time faces many challenges and the diversity of banking risks necessitates the need
for regulation of the industry and this can affect the performance of the same banks.
Consequently, the research sought to find out the influence of regulatory enforcement on
the relationship between strategic decisions and performance of commercial banks in
Kenya. The research design was a census survey whereby the population of the study
consisted of all the 41 commercial banks operating in Kenya. The study used primary
data which was collected through a self-administered questionnaires and the data
collected was analyzed by the use of mean and standard deviations while presentations
was done using tables, pie charts and percentages. The findings were that regulatory
enforcement affected the performance of the commercial banks in Kenya and the most
influential regulatory factor was the capital adequacy requirements, liquidity management
and the supervisory powers enforced by the CBK. The strategic decisions that were found
to influence the bank performance was the ability of the top management to scan the
environment appropriately for opportunities and at the same time involve all levels of
staff in the implementation of the same strategic decisions. From the regression, it was
found that indeed regulatory enforcement was a moderating factor to strategic decision
influencing the performance of the banks. The research concludes that there is need for
appropriate regulations to be developed to guide the sector and the same regulation
should evolve with the changes happening in the banking sector. The study recommends
that the players in the banking sector should not consider the regulations introduced by
the CBK as unnecessary obstacle but instead it is established for their own good since the
study proved that the bank performance is better achieved when the bank strategic
decision is supplemented with appropriate regulatory enforcement. The study
recommends that a study be undertaken in a different industry facing regulation such as
the sugar sector due to the challenges that the sector faces in being competitive like other
firms in the COMESA market.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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