Evaluation of Risk Diversification on Financial Performance of Commercial Banks Listed at Nairobi Securities Exchange, Kenya

Abstract

This study focused on one dimension for commercial banks to go into M&A; that is risk diversification and the effect of these factors on the financial performance of commercial banks listed in the NSE. The study purpose was to assess the effect of mergers and acquisition dimensions on financial performance of commercial banks listed at Nairobi Securities Exchange, Kenya. The study was guided by the following specific objectives; to, evaluate risk diversification on financial performance. This study employed an explanatory research design. The study population comprises of commercial banks that merged or were acquired between 2010 and 2020. These are 5 commercial banks in total. A census sample was employed to select all the banks targeted. This study used secondary data which was collected through the use of data sheets. Data analysis involved analysis of quantitative data using descriptive statistics, namely percentages, mean, standard deviation. Inferential statistics namely simple regression and Pearson's correlation were used to analyze the data. Simple Regression analysis was used to explore the relationship between the variables. The results were presented using tables and figures. The study will be of great significance to, the Government, Policy Makers, Management of Organizations, Investors and Scholars. The model indicated a significant relationship between Risk diversification and financial performance of the listed commercial banks. The study concludes that risk diversification enhances financial performance of commercial banks listed at Nairobi Security Exchange, Kenya. The study recommended that management of banks participating in M&A should entrench quality of management for enhanced diversification.