Title:
BANK SIZE AS A MODERATING FACTOR ON THE RELATIONSHIP BETWEEN BANK RESTRUCTURING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Authors:
Dr. Angela Mucece Kithinji

Abstract:
The main goal of this research was to examine how bank size moderates the relationship between bank restructuring and financial performance of commercial banks in Kenya. This study employed descriptive research design. The study was a census of all the 44 commercial banks in Kenya which were in operation as at 31st December 2014. This research collected secondary data gotten from banks annual report for the period of ranging from 2002 to 2014. The regression analysis model was used to estimate the moderating effect of size on the relationship between bank restructuring and profitability. The study established that moderation of the relationship between bank restructuring and financial performance using bank size was not significantly influenced by financial restructuring, operational restructuring and asset restructuring on financial performance of commercial banks. However, when bank restructuring variables were interacted with bank size the findings are that only capital restructuring had a significant interaction. It was therefore, concluded that bank size therefore moderates the relationship between bank restructuring and financial performance. The study recommends that there is need to institute policy reforms geared towards increasing the size of banks either internally by increasing their asset size or through mergers to expand their size. The regulator can also embark on setting a minimum size threshold with a view to significantly reducing the number of banks which would translate into the remaining ones becoming larger. Furthermore, there is need for commercial banks to strike a balance between enhancing their operations through operational restructuring or improving profits by focusing on aspects that have a direct positive effect on profits.