Impact of 2007-2009 global financial crisis on financial performance of commercial banks in Kenya
The banking sector is considered to be an important source of financing for most businesses. The common assumption, which underpins much of the financial performance research and discussion, is that increasing financial performance will lead to improved functions and activities of the organizations. The subject of financial performance and research into its measurement is well advanced within finance and management fields. It can be argued that there are three principal factors to improve financial performance for financial institutions; the institution size, its asset management, and the operational efficiency. To date, there have been little published studies to explore the impact of these factors on the financial performance, especially the commercial banks. This study proposes that there are measurable linkages among bank's size, asset management, the operational efficiency, and the financial performance. The purpose of this study is to analyze the financial performance and relationship to the global financial crisis on the listed commercial banks for the financial periods 2004-2009. In addition, to examine the relationships among measures such as return on assets (ROA and to discuss their impact on the bank's performance. Financial analysis is used to quantitatively examine the differences in performance among commercial banks in Kenya, and the banks are ranked based on their financial measures and performance for each bank. There is substantial uncertainty regarding the future impacts of the crisis, which is a major deterrent to investment, in tum a major driver of economic growth. A decomposition analysis for Kenya estimated that the impact of reduced growth would be to increase the headcount poverty ratio, affecting other human indicators. Kenya has not articulated a strong view on how to handle the crisis, although the central bank has taken some actions.