The Assessment of the Effect of Firm Size on Competitiveness of Commercial Banks in Kenya

Abstract

Over the past few decades, Kenya’s banking industry has been experiencing several challenges and upheavals. Thus, it is worth exploring the business strategies that banks adapt to survive and remain competitive in the banking industry. In establishing the nature of the relationship between the working environment and the outside environment, the size of a corporation plays a critical role. Therefore, the current study investigated the effect of firm size on the competitiveness of commercial banks in Kenya. The study adopted an Expost Facto research design to analyse data and establish relationships between variables. Ten-years secondary panel data collected on commercial banks of Kenya obtained from the Central Bank of Kenya database was utilised. Data was analysed inferentially using correlation and regression analysis. Descriptive statistics were utilised to summarise the data meaningfully. Results showed that commercial banks size (firm size) was positively correlated with the bank’s competitiveness (rho= 0.989, p<0.01). Commercial banks size significantly (p<0.05) affects their competitiveness. Therefore, the study concludes that firm size significantly affected the competitiveness of commercial banks in Kenya, which many authors in works of literature greatly supported. Based on the outcome, microfinance investors should focus on increasing firm size to have an increment in the portfolio returns. Further, commercial banks should improve their capability by increasing their firm sizes.