Effect of Macroeconomic Factors on the relationship between Asset Liability Management and Profitability of Commercial Banks in Kenya
DOI:
https://doi.org/10.53819/81018102t2274Abstract
The study sought to establish the influence of macroeconomic factors on the relationship between asset liability management and profitability among commercial banks in Kenya. The study was anchored on liability management theory. The study also drew its theoretical support from commercial loan theory, the market power theory and the efficient structure theory. The study was guided by the positivism philosophical paradigm and a cross sectional descriptive design adopted. The population of the study was the 42 commercial banks in Kenya that were operational between 2015 and 2020. Secondary data was obtained from the annual reports of CBK and audited banks’ financial statements from 2015 to 2020. Data was analyzed using descriptive and inferential statistics. The findings indicated that asset liability management had a statistically significant influence on the profitability among commercial banks in Kenya. Macroeconomic factors were found to have a statistically significant influence on the relationship between asset liability management and profitability among commercial banks in Kenya. The study has contributed to theory, policy and management in relation to how macroeconomic factors influences relationship between asset liability management and profitability among commercial banks in Kenya. In light of these findings, banks should ensure that asset liability management policies are crafted based on appropriate strategies for profitability enhancement. The study recommends that policy makers should enhance the economic growth and develop strategies to control inflation levels for the banking sector to thrive.
Keywords: Macroeconomic Factors, Profitability, Commercial Banks in Kenya
References
Acharya, V. V., & Schnabl, P. (2010). Do global banks spread global imbalances? Asset-backed commercial paper during the financial crisis of 2007–09.IMF Economic Review, 58, 37-73
Athanasoglou, P., Brissimis, S., & Delis, M. (2008). Bank-specific, industry-specific and Macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121-136.
Bain, J. S., (1951). Relation of Profit Rate to Industry Concentration, Quarterly Journal of Economics, 65: 293 – 324.
Belete T., (2013). Asset Liability Management and Commercial Banks Profitability in Ethiopia. Journal of Finance and Accounting, 4, 10, 2222-1697.
Central Bank of Kenya, (2020).Bank supervision annual report 2020. http://www. Central bank.go.ke/downloads/acts regulations/banking Act.pdf
Cytonn Investments, (2016) Kenya Banking Sector Report 2016.
Demsetz, H. (1973). Industry structure, Market Rivalry, Journal of Law and Economics, 16:1-9
Drobetz, W., & Wanzenried, G. (2006). What determines the speed of adjustment to the target Capital structure? Applied Financial Economics, 16(13), 941 – 958.
Kanwal, S., & Nadeem, M., 2013. The Impact of Macroeconomic Variables on the Profitability of Listed Commercial Banks in Pakistan. European Journal of Business and Social Sciences, 2 (9), 186-201.
Kiganda, E.O. 2014. Effects of Macroeconomic factors on Commercial Banks Profitability in Kenya: Case of Equity Bank Limited. International Journal of Economics and Sustainable Development, Vol. 5, No. 2, 2014, ISSN 2222-1700
Maigua, C., & Mouni, G., 2016. Influence of Interest Rates Determinants on the Performance of Commercial Banks in Kenya. International Journal of Academic Research In Accounting Finance and Management Sciences Vol. 6, No.2, April 2016, pp. 121- 133
Marozva, G. (2017). Empirical Study of Liquidity Risk embedded in banks’ Asset Liability Mismatches.
Memba, F., & Makau, N. F., (2014). Influence of asset liability management on financial performance of commercial banks in Kenya: Journal of Economics, Commerce and Management United Kingdom Vol. II, Issue 10, Oct 2014, page 1-20, ISSN 2348 0386.
Mohanty, B., & Mehrotra, S., (2018). The effect of liquidity management on profitability: A Comparative analysis of public and private sector banks in India. The IUP Journal of Bank Management, Vol. XVII, No. 1, 2018
Mugenda, O. M., & Mugenda, A. G. (2003). Research Methods: Quantitative and qualitative Approaches. Nairobi: African centre for technology studies.
Ongore, V. O., & Kusa, G. B. (2013). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237-252.
Osamwonyi, P. I. S., & Michael, C.I., 2014.The Impact of Macroeconomic Variables on Profitability of Listed Commercial Banks in Nigeria. European Journal of Accounting Auditing and Finance Research.Vol.2, No.10, pp.85-95.
Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press.
Pragathi, K. M., & Veena, K. P. (2018). An analysis of Asset Liability Management in Banking Sector: A case study of Kotak Mahindra Bank. IOSR Journal of Business and Management (IOSR-JBM). Volume 20, Issue 2. Ver. VIII (February. 2018), PP 01-07
Rao, K. R. M., & Lakew, T, B. 2012. Determinants of Profitability of Commercial Banks in Developing Country: Evidence from Ethiopia. International Journal of Accounting and Financial Management Research, 2 (3), 1-20.
Redington, F.M. (1952). Review of the Principles of Life –office Valuations, Journal of the Institute of Actuaries. Vol. 18, Pg. 286 -340.
Sanjay, S. (2015). Asset Liability Management and Commercial Banks’ Profitability in Nepal. A multidisciplinary Journal Volume 5, No. 1, 2015. ISSN 2091 - 1106
Sheela.P., & Bastray, T. (2014). Effect of Asset Liability Management on Commercial Banks Profitability in Indian financial market. International Journal of Business and Administration Research Review, Vol.1, Issue.6, July - Sep, 2014. Page 92
Smith, (1776). Theories of Money: Maryland and the Carolinas in Journal of Political Economy, volume 93.
Tee, E. (2017). Asset Liability Management and the profitability of listed banks in Ghana IOSR Journal of Economics and Finance Volume 8, Issue 3 Ver. IV (May - June 2017), PP 09-14
Saunders, M. N., Saunders M., Lewis P. & Thornhill A. (2007). Research Methods for Business Students, (5th Ed.). Pearson Education India.
