Corporate Diversification, Macroeconomic Factors and Performance of Quoted Deposit Money Banks in Kenya: An Empirical Assessment

• Main Authors: Osagie Osifo, Christopher Ighodaro
• Format: Article
• Language: English
• Published: Danubius University 2020-06-01
• Series: Acta Universitatis Danubius: Oeconomica
• Subjects: income diversification; exchange rate; returns on asset
• Online Access: http://dj.univ-danubius.ro/index.php/AUDOE/article/view/373/490
• ISSN: 2065-0175; 2067-340X

This study empirically examines the influence of corporate diversification, macroeconomic factors on performance of quoted deposit money banks in Kenya within a period of 2007- 2017.The study employs secondary data collected from deposit money banks annual audited financial statements. Employing the use of descriptive statistics, correlation analysis, panel unit root analysis, co-integration test and feasible generalized least squares (FGLS), the data were estimated with the aid of E-views 9.0 econometric statistical package. Using dependent variables (Returns on Assets and Tobin Q), explanatory variables of income diversification, foreign diversification, subsidiary diversification, exchange rate and inflation rate. The findings revealed that income diversification have positive and significant effect on all the performance indicators (ROA and TOBIN Q) used in the study and were significant at 1% significance level. Foreign diversification and Subsidiary diversification have mixed findings under the two performance variables. Exchange rate has a positive and significant impact on performance, and inflation rate was negative and significant. This study therefore recommends, amongst others, that deposit money banks should carefully adopt a strategy that will warranty ideal location forecasting and execution as this will further boost financial annexation in the system.