Impact of strategic planning on the performance of commercial banks: the case of public commercial banks in Eastern Hararghe, Ethiopia

Abstract

The financial institutions in emerging countries in general and Ethiopia in particular, where financial dualism is mostly practiced, strategic planning is critical to encounter the dynamic nature of the economic system. This study aims to examine the impact of strategic planning on the performance of public commercial banks in the context of Eastern Hararghe, Ethiopia. The study considered strategic planning perspectives: environmental scanning, strategy formulation, implementation, and evaluation as explanatory variables whereas organizational performance was a dependent variable. A cross-sectional research design was used to investigate the relationship and impacts of the variables. A sample was drawn from managers and senior staff, who engage in planning and monitoring activities. Structured questionnaires were designed and administered based on a five-point Likert scale to gather the data. Descriptive statistics and econometric regression analysis techniques were employed after proper coding and testing of the reliability of the items. The findings revealed that strategic planning strongly and positively correlates with the bank’s overall performance. Finally, the study recommends that commercial banks should adopt strategic planning processes to enhance their overall performance.