The Effect of Ownership Structure on the Financial Performance of Commercial Banks in Kenya
Abstract
This paper makes a strong input to business literature by examining the effects of
ownership structure on financial performance of commercial banks in Kenya. The
divergence of shareholders voting right enables them to acquire and exercise control with
considerably minimal involvement of equity. Zeitun and Tian (2007) underscored the
significance of the study of the effect of ownership structure and concentration on a
firm’s performance to the literature of finance theory. The study therefore investigated
whether there is an association between Ownership structure and the performance of the
43 commercial banks in Kenya and assess the impact of ownership to the outstanding
performance by locally owned and government owned banks. The objective of the study
was to determine the effect of ownership structure on the financial performance of
commercial banks in Kenya.
Secondary data is on bank ownership and accounting data from financial annual reports
of all the respective banks from the NSE and in the CBK website for a period of five
years between the year 2009 and 2013. Multiple regression analysis was used to
determine the effect of ownership structure on the financial performance of commercial
banks in Kenya.
From the findings the study revealed that ownership structure positively affects the
financial performance of commercial banks in Kenya. The study also revealed that there
was strong positive relationship between ownership structure and financial performance
of commercial banks in Kenya. The study further revealed that a unit increase in foreign
ownership would lead to increase financial performance of commercial banks in Kenya.
The study found that domestic ownership of the bank significantly affects the financial
performance of commercial banks in Kenya. From the finding the study concludes that
government ownership significantly affect the financial performance of commercial
banks in Kenya. From the finding the study revealed that a unit increase in ownership
concentration would lead to increase in financial performance of commercial banks in
Kenya.
Citation
Master of Science in FinancePublisher
University of Nairobi