The effect of restructuring on the performance of financial institutions in Kenya
Odula, Erick Ochieng
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The objective of this study was to examine the effect of restructuring on the perfomance of financial institutions in Kenya, considering that over the years. It has become a common practice for companies around the world to restructure as the expectation is that when management of a firm employs different restructuring techniques, some effect on the performance of the firm will be felt. Data from 43 Commercial Banks in Kenya was analyzed, during the eight year period of the study from 2008 to 2015. The data collected was from the annual published financial statements. Computation of the various ratios that make the variables under consideration namely Return on Equity, profit margin, asset utilization ratio, net interest margin, overhead efficiency, spread, interest expense ratio, provision for loan loss ratio and non – interest expense ratio of these banks were computed from the data collected from the financial statements of the banks for the period of the study. This was analyzed using a multiple linear regression model using SPPS version 20, in a bid to establish if there is any effect of restructuring on the performance of financial institutions in Kenya and if it exists, whether it has any significance on the performance of financial institutions. The findings indicate that 31.9% of the variables used in the study could explain the variability of performance of financial institutions while 68.1% of the performance of financial institutions could be explained by variables not included in the model in the study. It was further noted that an increase in profit margin, asset utilization ratio and net interest margin had a positive impact on performance of financial institutions. Overall, the results indicate that restructuring had a positive impact on performance of financial institutions in Kenya, however the impact was minimal hence the institutions need to employ other factors so as to improve their overall performance.