Abstract: This study aimed at contributing to research in determining to what extent macroeconomic factors influence financial performance banks in Kenya. A census of eleven listed commercial banks in Kenya that were in operation from 2012 to 2017, was carried out to gather information on the financial performance of banks. The study concluded that the effect of inflation on financial performance is statistically insignificant. However, with regards to the effect of interest rate on financial performance of commercial banks, the study concluded that interest rate positively and significantly affects the financial performance of commercial banks listed on the NSE, Kenya. The study also concluded that there exist an inverse and significant effect of exchange rate on financial performance of commercial banks listed on the NSE, Kenya. Lastly, on the moderating effect the bank size on the relationship between macroeconomic factors and financial performance of commercial Banks listed at the NSE, Kenya. The study concluded that bank size has a positive and significant moderating effect on the relationship between interest rate and financial performance of commercial banks listed on the NSE, Kenya. Also, the study concluded that bank size has a negative and significant moderating effect on the relationship between exchange rate and financial performance of commercial banks listed on the NSE, Kenya. The study recommends that CBK should manage interest rates adequately in order to avoid its fluctuations as this will hamper performance of banks. Since the study concluded that the effect of exchange rate on financial performance is negative but statistically significant, the study recommends that bank management consider the prevailing and anticipated exchange rates in the economy when making decisions.
Keywords: Inflation, interest rate, exchange rate, bank size, financial performance, commercial banks.
Title: MACROECONOMIC FACTORS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS LISTED ON THE NAIROBI SECURITIES EXCHANGE, KENYA
Author: Annrose Wanjiru Nguku, Vincent Shiundu
International Journal of Social Science and Humanities Research
ISSN 2348-3156 (Print), ISSN 2348-3164 (online)
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