THE EFFECT OF MERGERS AND ACQUISITIONS STRATEGIES, RISK MANAGEMENT, INSTITUTIONAL CHARACTERISTICS ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

The objective of this paper was to examine the joint effect of mergers and acquisitions strategies, risk
management and institutional characteristics on the financial performance of commercial banks in Kenya.
Synergies theory, resource-based view theory, agency theory, and concentration theory were used to
achieve the study's objectives. A correlational descriptive research design with cross-sectional data
analysis and positivism paradigm was used to accomplish the study’s objectives. The thirty Kenyan
commercial banks that had undergone mergers and acquisitions by 2017 formed the population of the study.
The data was gathered from publicly available financial statements, which were split into two; three years
before and three years after mergers and acquisitions, with the transaction year been excluded. To
determine the mathematical connection among the variables in the study, multiple regressions were used.
The results of the study showed that jointly mergers and acquisitions strategies, risk management and
institutional characteristics did not influence the financial performance of commercial banks before
mergers and acquisition. The study result also indicated that mergers and acquisitions strategies, risk
management and institutional characteristics influenced the financial performance of commercial banks
after mergers and acquisitions. The findings of the research provide answers to the inconsistences found in
the prior reviewed studies by empirically testing the study variables thus contributing to knowledge by
providing new insights based on the variables studied. The research findings contribute to the theory by
revealing the relationship among the supporting theories. Synergies theory results to increased value of the
firm, where agency theory highlights possible misuse of free cash flows and guides on solutions to avoid
the agency problem ,while resource based view supports mergers and acquisitions strategies as a means of
mopping excess cash flow by combining homogenous resources for competitiveness. The research findings
further contribute to the policy and practice in the sense that; the insights will help decision-making
processes geared toward targeted outcome. The study results are limited to variables of the study and hence
a recommendation of similar study using other attributes in varied context and scope.
Key words: Mergers and acquisitions strategies, risk management, institutional characteristics, financial
performance, commercial banks .