How Does Strategic Planning Influence The Performance Of Financial Institutions? An Empirical Study Of Ethiopia

This research investigates the impact of strategic planning on the performance of financial institutions in Ethiopia.Besides this,the study investigates the mediating role of strategic innovation ? institutional capability and the moderating role of managerial involvement ? political environment.This study introduces the view that strategic planning influences the performance of financial institutions,either directly or through mediation and moderation.This study adopted a mult i-theoretical approach where the integration of the resource-based view,dynamic capability theory ? institutional theory formed the theoretical foundation.The study used a positivistic paradigm employing a cross-sectional research design.A total of 175 questionnaires were delivered to the respondents,whereby 142 of them are returned.The study mainly relied on primary data that was obtained by administering questionnaires.This study employs hierarchical linear models(HLM)to examine institutional and individual characteristics related to the outcomes of interest by using SPSS MIXED procedure and MLMED for mediation hypothesis.These data consisted of 142 managers from 35 different financial institutions.So that 142 managers(level 1)are nested in to 35 financial institutions(level 2).According to the findings,hypotheses focusing on the influence of strategic planning confirmed a significant positive influence on both financial performance ? non-financial performance.Similarly,planning techniques confirmed significant positive results on both financial performance ? non-financial performance,and planning resources confirmed significant and positive effect on financial performance but insignificant effect on nonfinancial performance.The results established a statistically significant and positive intervening influence of strategic innovation within group on the relationship between strategic planning and financial performance,and statistically significant and positive mediation influence of strategic innovation within-group on the relationship between strategic planning ? non-financial performance.However the between-group indirect effect of strategic innovation on the relationship between strategic planning ? financial performance has insignificant effect and has positive and significant between-group indirect effect of strategic innovation on the relationship between strategic planning and non-financial performance.The finding within-group indirect effect of institutional capability on the relationship between strategic planning ? financial performance has significant and positive effect and also within-group indirect effect of institutional capability on the relationship between strategic planning ? non-financial performance has significant and positive effect.When we come to between-group indirect effect of institutional capability on the relationship between strategic planning ? financial performance has insignificant effect but between-group indirect effect of institutional capability on the relationship between strategic planning ? non-financial performance has significant and positive effect.The moderation effect of managerial involvement on the relationship between strategic planning ? performance confirmed a positive and significant influence result in financial performance and insignificant effect on nonfinancial performance measures.The other moderation role of the political environment confirmed a positive and significant influence result on the relationship between strategic planning and financial performance.Besides to this political environment has positive and significant moderate effect on the relationship between strategic planning and nonfinancial performance.These results supported the theoretical view that financial institutions achieve superior performance through the configuration of resource bundles and transformation of innovation,involvement,and participation lead to valuable dynamic capabilities that support the resources based view.This study expands the knowledge edge in the field of strategic management through the discovery that strategic planning affects the performance of financial institutions both directly and indirectly through the mediation of strategic innovation ? institutional capability and moderation of managerial involvement ? political environment.It supports the perspective that a firm?s competitive advantage is a function of scarce,valuable,and inimitable resources within strategic planning.Financial institution managers who deploy,combine,and coordinates strategic planning resources would perform better than their competitors and it also support the dynamic capability theory.The study recommends that financial institutions are seeking to gain a competitive advantage through innovation like service innovativeness and process improvement.The findings provide diverse implications on theory,policy,and practice.Policymakers will utilize t he findings from the study as ad vice for determining critical success factors within the financial sector.Future studies need to focus on other mediating and moderating variables in different relationships.