Effects of global financial integration on financial stability of commercial banks in Kenya
This study sought to determine the effect of global financial integration on the financial stability of commercial banks in Kenya. A relational study designed was used and secondary data was collected from a sample of 43 commercial banks operating in Kenya. These were the commercial banks registered and operating in Kenya under the watch of Central Bank of Kenya. A regression model was devised for the study and analysis made in terms of t-statistics and R2. The significant influence of financial integration on bank stability was interpreted at 95% level of confidence. The study found that financial integration had a generally negative influence on stability of commercial banks as shown from its coefficient of determination. The R square was 0.092 showing that financial integration influenced up to 9.2% of the variance in financial stability. The analysis of variance showed that the regression did not significantly explain the variance in the model. The significance was very low at 0.620. The study concludes that much of the variance in financial stability of commercial banks was as a result of other factors not tested in this study and these conform to previous studies (Eatwell, 1997, Rodrik, 1999 and Rogoff, 2002) who do not agree that financial integration is beneficial to stability of financial markets in developing countries. The study recommends that the Government and management of various commercial banks in Kenya need to be cautious when setting up policies that open up the Kenyan market to foreign investors. This is especially important at this time when the world is experiencing global economic recession which may have the implication of increasing volatility of Kenyan financial market.
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