The Effect of Idealised Influence on the Performance of Commercial Banks in Kenya

Abstract

Kenya's commercial banks have recorded persistent performance challenges, evidenced by a gross non-performing loan ratio that recently reached its highest level in over two decades, softening returns on assets, and a series of high-profile bank failures attributed to weak, unethical leadership. Yet existing Kenyan studies have examined idealised influence, a core dimension of transformational leadership, mainly in relation to employee commitment and job satisfaction rather than direct organisational performance outcomes, and have not isolated idealised influence from the other transformational leadership dimensions to establish its distinct contribution. This study addresses that gap by examining the effect of idealised influence on the performance of commercial banks in Kenya. The study adopted a positivist, cross-sectional design intended to test a hypothesised association rather than establish causality. The overall sample size (n = 392) was determined from a target population of 20,126 senior managerial and supervisory employees across Kenya's 38 licensed commercial banks using Yamane's (1967) formula, then proportionally allocated across management (223) and supervisory (169) strata by their true share of the population (57.0% and 43.0% respectively). Data were collected via a structured 5-point Likert questionnaire in which every respondent, irrespective of job level, rated the idealised influence of their own immediate leader; the same respondents also rated their bank's performance, and analysed using correlation and simple linear regression; 282 valid responses were obtained (71.9% response rate). Idealised influence was positively and significantly associated with the performance of commercial banks (r = .715, p < .001; R² = .511, F(1, 280) = 291.827, p < .001; B = 1.07, p < .001), statistically accounting for 51.1% of the variance in performance; this magnitude should be interpreted cautiously, as it may partly reflect shared-method variance from the single-source, same-instrument design rather than the true explanatory power of idealised influence alone. The cross-sectional, single-source design limits causal inference, and rating both constructs via the same-instrument raises the risk of common method bias inflating the observed association. Idealised influence was examined in isolation from the other three transformational leadership dimensions, so potential interaction or synergistic effects with those dimensions were not tested. Performance was measured as employee-perceived organisational performance (customer satisfaction, learning and growth, Internal Process Quality) rather than objective financial metrics, and individual-level perceptual data were used to represent organisational-level outcomes without formal multilevel aggregation statistics. Idealised influence alone also leaves 48.9% of performance variance unexplained, indicating other factors also matter. The findings extend Transformational Leadership Theory to the Kenyan commercial banking context. Commercial banks should institutionalise idealised influence as a leadership competency through targeted leadership development, mentorship, and values-based performance appraisal systems.