| dc.description.abstract | The main purpose of this study was to examine the influence of financial innovation
on profitability of commercial banks in Kenya. Commercial banks are engaging in
financial innovation as a response to the complexity of the ever-changing business
environment characterized by uncontrollable events and technological advancement.
The general objective of the study was to examine the influence of financial innovation
on profitability of commercial banks in Kenya. The specific objectives were to
determine the influence of financial product innovation, financial process innovation,
financial marketing innovation and organizational innovation on the profitability of
commercial banks in Kenya. Theories applied in the study were Transaction Cost
theory, Abernathy and Utterback theory, Diffusion of Innovation theory and Financial
Intermediation theory. The study adopted descriptive design, with a target population
of 102 respondents and sampling size calculated using Krejcie and Morgan formula to
determine the sample size of 77. Primary data was collected by administering
structured questionnaires on senior management whereas secondary data was
obtained from published CBK’S annual reports for a five-year period between 2018
and 2022. The reliability of data collection instrument was accepted at Cronbach’s
reliability coefficient of 0.8. All the diagnostic tests done including normality test,
autocorrelation test, multicollinearity test, linearity and heteroscedasticity test
confirmed the reliability of the regression model. Statistical analysis was carried out
using SPSS Statistics for Windows, version 27 and data presented using tables and
graphs. Hypothesis testing was done using multiple regression with the results
revealing that all the four innovation factors have a positive and significant influence
on profitability. The R square results of .746 indicated that independent variables
explain 74.6% of the variations in dependent variable. The study therefore
recommended that there is need for bank managers to continuously invest in
developing new products and processes as they increase bank incomes. Additionally,
financial experts to use the study findings in advising managers on the ideal business
model and structures that greatly reduce costs hence increasing profits. | en_US |
