EFFECT OF OWNERSHIP STRUCTURE ON PERFORMANCE OF FINANCIAL INSTITUTIONS
DOI:
https://doi.org/10.47941/ijf.193Keywords:
ownership structure, performance, financial institutionsAbstract
Purpose: The purpose of the study was to examine the effect of ownership structure on performance of financial institutions.
Methodology: The study used explanatory research design. The study used stratified random sampling to select respondents from target population comprising of managers of 46 commercial banks, 52 Micro Finance institutions (MFIs) and 200 SACCOs and a sample size of 239 respondents obtained. Data was collected using questionnaires. Descriptive statistics was presented, while inferential statistics was done using Pearson product moment correlation.
Results: Risk monitoring [r = .206, p<.05] had a positive relationship performance of financial institutions. The more there was risk monitoring the higher the performance of financial institutions. A proper risk monitoring practices was used to ensure that risks are in line with financial institution's management goals in order to uncover mistakes at early stages. The risk monitoring had positive relationship on performance of financial institutions (P<0.05). The null hypothesis (HO4) stating that there is no significant effect of risk monitoring on the performance of financial institutions was rejected
Unique contribution to theory, practice and policy: The Central Bank of Kenya and Sacco's Regulatory Authorities as regulators should make considerations due to the complexity of the financial sector nowadays makes it necessary before any policy analysis should rely upon different indicators and mainly upon those that reflect the whole reality of the industry performance and explicitly consider and carefully impose some regulations that consider different characteristics of ownership structure of financial institutions and the level of risk tolerance. The policy implications might be different across different types of financial institutions. Consider establish effective and efficient risk analysis mechanisms that will assist financial institutions ascertain their risk earlier.
Downloads
References
Adeusi S., Oluwafemi S., Niyi I., Obawale S., Oladenye, "¦, Olawale (2013). Risk management and financial performance of banks in Nigeria. IOSR, Journal of Business and Management, 14, 52-56
Asat, S.H., Maruhun, E.N.S., Haron, H., and Jaafar, M. (2015). Enterprise risk management (ERM) and organisational performance: The case of housing developers in Malaysia. MARIM International Conference, Langkawi
Bajaj, M., Chan, Y-S., & Dasgupta, S. (1998). The relationship between ownership, financing decisions and firm performance: a signaling model. International Economic Review, 39(3), 723-744. DOI: 10.2307/2527397
Berle, A.,& Means, G. (1932).The Modern Corporation and Private Property New York, NY: Macmillan.
Carpenter, M.A. & Westpal, J.D. (2001). The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision making, Academy of Management Journal, 44 (4), 639-990.
Delios, A., Wu, Z. J., & Zhou, N. (2006). A new perspective on ownership identities in China's listed companies. Management and Organization Review, 2(3), 319-343.
Douma,S., George, R., & Kabir, R. (2006). Foreign and Domestic Ownership, Business groups, and Firm Performance: Evidence from a Large Emerging Market. Strategic Management Journal 27 (7), 637-657.
El-Hawary, D., Grais, W., & Iqbal, Z. (2007). Diversity in the regulation of Islamic financial institutions. The Quarterly Review of Economics and Finance, 46(5), 778-800.
Fazlzadeh, A., Hendi, A. T., & Mahboubi, K. (2011). The examination of the effect of ownership structure on firm performance in listed firms of Tehran stock exchange based on the type of the industry. International Journal of Business and Management, 6(3), 249-266.
Goergen, M., & Renneboog, L. (2001). Investment policy, internal financing and ownership concentration in the UK. Journal of Corporate Finance, 7(3), 257-284
Jensen, M. & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kamau, A.W. (2009). Efficiency in the Banking Sector: An Empirical Investigation of Commercial Banks in Kenya. A thesis submitted in partial fulfillment of the Requirements of Nairobi University for the Degree of Doctor of Philosophy. Nairobi: University of Nairobi
Kiruri, R. M. (2013). The effects of ownership structure on bank profitability in Kenya. European Journal of Management Sciences and Economics, 1 (2), 116-127.
Lee, S. (2008). Ownership Structure and Financial Performance: Evidence from Panel Data of South Korea. Working Paper 17, University of Utah, Department of Economics.
Mallin, C.A. (2004). Corporate Governance, Oxford: Oxford University Press.
Niresh, A., & Thirunavukkarasu, V. (2014). Firm size and profitability: A study of listed manufacturing firms in Sri Lanka.
Ongore, V. O., & K'Obonyo, P. O. (2011). Effects of selected corporate governance characteristics on firm performance: Empirical evidence from Kenya. International Journal of Economics and Financial Issues, 1(3), 99-122.
Quach, E.I. (2005), "Financial ratios, discriminant analysis and prediction of corporate bankruptcy", Journal of Finance, 23 (4), 589-609.
Saeidi, P., Sofian, S., Zaleha, S., and Abdul, B. (2014). A proposed model of the relationship between enterprise risk management and firm performance. International Journal of Information Processing and Management 5(2): 70-80.
Sarita Bahl, D. S, (2012). Techniques to enhance securitization in infrastructure and project financing. Journal of Radix International Educational and Research Consortium Department of commerce & Management, Arya College, Ludhiana. www.rierc.org.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2017 Fredrick Kiprop Lagat, Dr. Joel Tenai
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
