Abstract: The current study sought to assess the effect of macro-economic factors on financial performance of commercial banks in Kenya. The investigation explicitly assessed the implications of CBK rate, money supply, exchange rate and inflation on financial performance of commercial banks in Kenya. This research was based on Interest Rate Parity Theory, Quantity Theory of Money and Agency Theory. The examination adopted causal design of research. Research target population was Kenyan banks for the period of study (2012 to 2016) which are 40 in total. The research results showed that CBK Rate had an inverse considerable consequence on banks’ -performance in Kenya. Secondly, it was found that money supply had a positive momentous consequence on banks’ performance in the context of Kenya. Thirdly, the outcomes from the regression analysis point to the fact that inflation had an inverse and immaterial influence on bank performance. Finally, the results of the investigation showed that exchange rate has a positive non-significant influence on banks’ perf0rmance. The recommendation from the examination was that Kenya’s Central Bank ought to be cautious in setting the base rate, it should be go lower rather than higher as this impacts negatively on bank performance. Also, the study recommended that the government of Kenya through the apex regulatory body should ensure adequate money supply in the country’s economy as higher supply results in better performance of banks.
Keywords: Central Bank Rate, Money Supply, Inflation, Exchange rate Financial Performance, Commercial Banks.
Title: MACRO-ECONOMIC FACTORS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Author: SAMUEL OMBOKE NYABUTE, DANIEL MAKORI
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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