The relationship between ownership structure and financial performance of Commercial Banks in Kenya
Abstract
This paper makes a strong input to business literature by examining the relationship 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
relationship 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
relationship of ownership to the outstanding performance by locally owned and government
owned banks. The objective of the study was to determine the relationship 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
Capital Market Authority (CMA) and in the CBK website for a period of four years between the
year 2010 and 2013. Multiple regression analysis was used to determine the relationship of
ownership structure on the financial performance of commercial banks in Kenya. From the
findings the study revealed that ownership structure positively relates to 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
Publisher
University of Nairobi