Assessing strategic responses on performance of commercial banks in Kenya: a case study of equity bank branches Nairobi county

Abstract

Kenya’s financial sector has incurred substantial growth recently. The overall performance of financial firms, in particular, is influenced by diverse strategic responses to the dynamic banking sector with regulatory changes, changing market conditions, and stiff competition from other financial institutions. Thus, the primary goal of this research was to assess how strategic responses affect the performance of commercial banks in Kenya, particularly concentrating on Equity branches within Nairobi. This research explored four principles of strategic responses, including information technology, knowledge management, marketing strategies, and operational adjustment, as the independent construct on the overall performance of commercial banks as the dependent construct. The study was anchored using four main theories, Resource Dependence, Resource-Based View, and Dynamic Capabilities, to inform the independent variables. Meanwhile, stakeholder theory was used to notify the dependent construct. The study employed a descriptive survey method. The unit of analysis in this study was Equity Bank branches. Currently, Equity Bank has 192 branches across the nation, including 52 branches in Nairobi County. The target population included the 52 branches distributed in the different regions within Nairobi County. The respondents for this study consisted of individuals from top, middle, and lower-level management, incorporating nine professional cadres within each bank branch, summing up to 411 as the target population. A stratified sampling technique was utilized to classify the branches into small groups, and purposive sampling was used to select the sample size, adding up to 102 respondents. The study used structured questionnaires to obtain primary data. Information was assessed using inferential and descriptive analysis, including percentages and means. A multiple linear regression model and SPSS software were used, and the results were presented in tables. The outcomes revealed that the four independent variables explain 74.6% of the variation of Equity Bank’s performance. Additionally, the ANOVA results indicated that the model significantly elaborated the relation between strategic responses and performance. Specifically, information technology and marketing strategies positively and significantly influenced Equity Bank’s performance. However, knowledge management and operational adjustments recorded a positive but did not have a significant influence on Equity Bank’s performance. The study, therefore, concluded that even though knowledge management and operational adjustments are crucial for the performance of commercial banks, information technology and marketing capabilities are stronger determinants of the banks’ performance. The study recommended that commercial banks invest in more knowledge acquisition and information sharing to enhance knowledge management and regularly update operational procedures to enhance commercial banks’ performance.