IMPACT OF FINANCIAL TECHNOLOGY INNOVATIONS ON THE MARKET VALUE OF LISTED COMMERCIAL BANKS IN KENYA
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Date
2025-07
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Publisher
THE CATHOLIC UNIVERSITY OF EASTERN AFRICA
Abstract
The market value of listed commercial banks in Kenya has exhibited significant fluctuations in recent years, raising concerns among stakeholders about its stability and long-term sustainability. These fluctuations, alongside the rapid rise of financial technology (FinTech) innovations that have reshaped traditional banking operations, highlight the need to examine their impact on market valuation. The study's general objective was to determine the impact of financial technology
innovations on the market value of listed commercial banks in Kenya. The specific objectives were to investigate the impact of FinTech innovations-namely payment solutions, financing mechanisms, and advisory services-on the market value of the ten commercial banks listed on the Nairobi Securities Exchange (NSE) from 2013 to 2023, while also assessing the moderating role of bank size. Anchored in the Network Effect Theory, Financial Intermediation Theory, Disruptive Innovation Theory, the Resource-Based View, and the Efficient Market Hypothesis, the study adopted a positivist research philosophy and applied a longitudinal research design with a census approach. Quarterly panel data were sourced from the NSE, the Central Bank of Kenya (CBK), and bank financial statements. To address endogeneity and establish causal relationships, the study employed a triangulated methodology comprising Generalized Method of Moments (GMM), Difference-in-Differences (DiD), and Granger Causality tests. The findings revealed that the adoption of FinTech innovations post-2016 significantly influenced market value. Digital wallets under payment solutions and crowdfunding under financing mechanisms emerged as key drivers of value creation. Conversely, advisory services such as robo-advisory and RegTech exhibited no statistically significant short-term effect, though they showed potential for long-term strategic relevance. Bank size exerted minimal moderating influence, with Tier II and III banks displaying superior FinTech agility—challenging the assumptions of the Resource-Based View. The study validated the explanatory power of the Network Effect Theory, Financial Intermediation Theory, and Efficient Market Hypothesis, and contributed to policy by introducing a RegTech Adoption Index. It also informed the development and launch of the Inuka Peer-to-Peer Lending Platform in 2025. These findings offer practical guidance for banks, regulators, and policymakers seeking to strengthen Kenya’s financial system. The study’s implications align with Kenya’s Vision 2030, SDG’s 8 and 9, the African Union’s Agenda 2063, and the EAC Vision 2050 in advancing inclusive, innovative, and resilient digital finance ecosystems.
Description
Dissertation
Keywords
Financial technology (FinTech), market value, listed commercial banks, bank performance, financial innovation, stock market valuation, Kenya