Open AccessFinancial innovation, firm performance and the speeds of adjustment: New evidence from Kenya’s banking sector
Author(s) -
Moses M. Muthinja,
Chimwemwe Chipeta
Publication year - 2018
Publication title -
journal of economic and financial sciences
Language(s) - English
Resource type - Journals
eISSN - 2312-2803
pISSN - 1995-7076
DOI - 10.4102/jef.v11i1.158
Subject(s) - business , mobile banking , finance , financial sector , estimation , unit (ring theory) , financial innovation , distributed lag , panel data , lag , financial system , economics , econometrics , marketing , computer science , management , computer network , mathematics education , mathematics
This article examines the speed of adjustment of firm performance to financial innovations usage and the speed of adjustment of financial innovation to financial innovation drivers for banks in Kenya. We used the Koyck distributed lag model, which is estimated using dynamic panel estimation with System Generalised Method of Moments. We find that it takes on average 1.179 years for bank financial performance to adjust to the four financial innovations studied. Secondly, it takes less than a year (0.368 years) to accomplish 50% of the total change in firm performance following a unit-sustained change in the financial innovations. Moreover, mobile banking has the shortest mean lag (2.849), while Automated Teller Machines (ATMs) have the longest mean lag (4.926). Notably, it takes approximately three years for mobile banking to adjust to financial innovation drivers at firm level and on average five years for ATMs to adjust to the financial innovation drivers.