Effect of Financial Structure on Financial Performance of Listed Commercial Banks in Kenya

Abstract

Globalization has brought about changes in the financial industry thereby markets with fast changing technology must make things happen. Financial Performance and innovation are interrelated in that banks cannot sustain themselves if they fail to embrace innovation in their operations. The main objective of the study was to determine the effect of Innovation on financial performance of listed banks in Kenya. Specifically, the study investigated the effect of product innovation, process innovation, service innovation and institutional innovation on financial performance of listed banks in the Nairobi Securities Exchange. The target population included 5 conveniently selected banks out of the 11 listed banks in the Nairobi Security Exchange. These included Equity bank, Kenya commercial bank, Cooperative bank of Kenya, National Bank of Kenya and Barclays Bank of Kenya. The study sample was drawn from the population using stratified random sampling technique with 94 respondents represented by the branch managers drawn from the different banks. The study used both primary data and Secondary data. Data analysis was carried out by use of descriptive statistics and inferential statistics that involved the use of regression analysis to determine the strength of association between the variables. The findings revealed that innovation has a significant effect on financial performance and recommended that banks should adopt innovation to enhance growth, competition, increased productivity and profits.