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Influence of Alternative Financing on the Relationship between Managerial Competency and Efficiency of Small and Medium Enterprises in Kenya

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  • Jackson Njau Waweru

    (Department of Business and Entrepreneurship, School of Business, Karatina University, Kenya)

  • Kennedy M. Waweru

    (School of Business, & Economics, The Co-operative University of Kenya)

  • Kenneth L. Wanjau

    (School of Business, Karatina University, Kenya)

  • Josphat K. Kinyanjui

    (School of Pure and Applied Sciences, Karatina University, Kenya)

Abstract

The purpose of this article is to examine the impact of selected internal and external factors on a bank’s profitability. The research investigates the impact of operational size, liquidity, risk appetite, management efficiency, product diversification, concentration, GDP growth and inflation change on the profitability of sample of 4179 European commercial banks for the period between 2011 and 2015. The input data were obtained from the Orbis Focus and the World Bank databases. The determinants were used to construct two models with ROAA and ROAE as a proxies and regression analysis using between groups panel approach was conducted. It has been found that growing economy impacts banks’ profitability positively. It has been robustly confirmed that managementefficiency, product diversification, market concentration and inflation result in decreased profitability. The operational size has been found to be negatively linked to changes in net results but was confirmed only with ROAA model. Similarly, statistically significant results with regard to liquidity were found only for ROAA model and the correlation was positive.The strong negative impact of market concentration on profitability is an interesting finding allowing for further exploration of reasons for this unexpected vector of correlation.

Suggested Citation

  • Jackson Njau Waweru & Kennedy M. Waweru & Kenneth L. Wanjau & Josphat K. Kinyanjui, 2018. "Influence of Alternative Financing on the Relationship between Managerial Competency and Efficiency of Small and Medium Enterprises in Kenya," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 7(1), pages 13-26, January.
    • Handle: RePEc:rbs:ijfbss:v:7:y:2018:i:1:p:13-26
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