Effect of Internet Banking on Financial Performance of Commercial Banks Listed on the Nairobi Securities Exchange

Abstract

The financial challenges faced by commercial banks in Kenya albeit the increased adoption of electronic banking as well as scanty pertinent empirical evidence, have necessitated this study which sought to establish the influence of e-banking on financial performance of commercial banks in Kenya. Specifically, the study examined the effect internet banking on financial performance of listed commercial banks in Kenya. The study was guided by the innovation diffusion, and economic value added theories. An explanatory research design was adopted. The 11 commercial banks listed at the Nairobi Securities Exchange as at December 31st , 2020 constituted the accessible population. Purposive sampling technique was employed to obtain a sample of 11 listed banks from the 42 licensed banks in Kenya. The study used secondarydata which were panel in nature covering a period from 2014 to 2020. The pertinent data were collected using a structured data collection sheet through desk research. The Statistical Package for Social Sciences was used to analyze data using both descriptive and inferential statistics. The results of the analyses were presented in form of tables. According to the study findings internet banking (p = 0.016) had statistically significant correlation with return on equity (the indicator of financial performance used in this study) at p-value = 0.05. The results of simple linear regression analysis indicated that, at p-value = 0.05, the effect of internet banking on financial performance was statistically significant (t = -3.561; p = 0.016). It was concluded that internet banking was an important dimension of electronic banking with regard to financial performance of listed commercial banks. It is recommended that commercial banks should be more comprehensive in their reporting on internet banking.