| dc.description.abstract | Profitability of commercial banks in Kenya have been declining since 2010 which was largely
attributed to macro-economic factors, fiscal policies introduced by central bank of Kenya and
market activities such as issuance of bonds and capping of interest rates. There has also been
increased integration due to embracement of financial innovations in the banking sector however
the moderating effects of financial innovations on the relationship between GDP per capita and
financial performance is still uncertain. The objective of this study was to investigate the
moderating effect of financial innovation on the relationship between GDP per capita and financial
performance of commercial banks in Kenya. The study was based on two theories: Keynesian
Economics theory and Constraint Induced Financial Innovation Theory. The study utilized
secondary data for 10-year period as from 2011 to 2020. The target population of the study was 42
commercial banks that are licensed and supervised by the Central Bank of Kenya. Secondary panel
data on financial performance of Commercial Banks was obtained from the individual institutions’
financial reports while data on macroeconomic factors was obtained from both Central Bank of
Kenya and Kenya National Bureau of Statistics. Return on assets was used to measure financial
performance. The study found a significant and positive relationship (b=0.594, t=2.939, p=0.022)
between GDP per capita and ROA. The study found no moderating effect of financial innovations
on the relationship between GDP per capita and financial performance of commercial banks. The
study recommends that banks should implement the highest degree of innovations, which will
enable them achieve very high ROA. | en_US |
