Leadership Style and Financial Performance of Commercial Banks in Kenya

Abstract

This study aimed at establishing the influence of leadership style on the financial performance of commercial banks operating in Kenya. The study adopted a positivist philosophy, correlational and cross-sectional research deigns and a target population comprising management staff working in commercial banks. 385 respondents were selected from 10,395 management staff. Primary data was collected using structured questionnaires with data being analyzed using both descriptive and inferential statistics. Parametric test statistics was adopted to establish the significance influence of variable effect at 95% level of significance as well as to test the study hypothesis. The regression of coefficients indicates that transformational leadership has a positive and significant partial effect on financial performance of commercial banks in Kenya with Democratic Leadership having a positive and significant partial effect on financial performance of commercial banks in Kenya. The study also shows that autocratic leadership has a positive and significant partial effect on financial performance of commercial banks in Kenya while Laissez-Faire leadership has a negative and significant partial effect on financial performance of commercial banks in Kenya. The study recommends that that top managers of the commercial banks need to take up effective transformational and democratic leadership style in their management programs. This can be achieved through staff training and development using both in-house and open training programs as well as continuing development programs. Banks should join hands with training and educational institutions in regard to development of leadership modules under their training programs.