THE INFLUENCE OF MANAGER’S DEMOGRAPHIC INFORMATION ON THE RELATIONSHIP BETWEEN FINANCIAL DETERMINANTS INDICATORS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

The purpose of this study was to examine the determinants of Commercial banks financial performance in Kenya. Specifically the study sought to examine the influence of credit information sharing on Commercial Banks financial performance, investigate risk management practices on Commercial Banks financial performance, evaluate the influence of portfolio diversification on Commercial Banks financial performance; investigate the effect of collateral security on Commercial Banks financial performance and determine the moderating influence of managers’ demographic information on the relationship between determinants and commercial banks financial performance. Mixed method which comprised of quantitative and qualitative designs was applied in this study. Quantitative and qualitative data were collected through questionnaires. Target population was 39 licensed Commercial Banks in Kenya from which one hundred and seventeen (117) managers were purposely selected to form sample size. Cronbach Alpha test of 0.961 was obtained indicating the reliability of the research instrument. Content and criterion validity were ensured through incorporating the experts’ suggestions in the final document. Data was analyzed using descriptive statistics and inferential statistics which included correlation analysis, bivariate regression analysis and multiple regression analysis after testing for normality, multicollinearity and performing factor analysis. The study findings established a strong positive correlation between credit information sharing and financial performance, a strong positive significant correlation was found between risk management practices and financial performance, a strong positive significant relationship between portfolio diversification and financial performance and a strong positive significant relationship between collateral security and financial performance. On combination of the four determinants, a strong positive significant correlation was established between the determinants (credit information sharing, risk management practices, portfolio diversification and collateral security) and dependent variable (financial performance). This indicated that the determinants influenced financial performance to a greater extent when combined. On introduction of demographic information the influence on the financial performance was enhanced. Further, the arrangement of the determinants according to their effect on financial performance indicated that, portfolio diversification had more effect on performance followed by risk management practices, collateral security and credit information sharing. I recommend the commercial banks to adopt these findings since they will enhance their profits and ensure sustainability. That on implementation of the determinants the banks should employ competent (experienced and skilled) manpower to install operational risk management framework, enhance product diversification, credit information sharing to avoid multiple loaning and non-performing loans and collateral security adopted should motivate earlier repayment of credit facility and avoid recoveries. Further study should be conducted to establish whether salary and other personal emoluments affect the relationship between the determinants and financial performance in Kenya.