The Relationship between Corporate Ownership and Financial performance among quoted Commercial Banks in Kenya

Abstract

Ownership structure is usually considered one of the core internal mechanisms of corporate governance and as a result, the relationship between ownership structure and corporate performance has received considerable attention in the finance literature. The purpose of the study is to examine the relationship between corporate ownership and firm performance of listed commercial banks at the NSE. The study adopted a cross-sectional research design and used secondary data for the year 2007 to 2011. The data was collected from the financial statement of the banks to establish the relationship between the two variables. The data was analyzed using regression analysis and the strength of the model was established. Pearson and Spearman’s rank correlation was also determined. The size of the firm was found to have a positive coefficient while leverage had a negative coefficient. Firms’ size causes the returns of the firms to be increased and it is found to be statistically significant. The regression coefficient of the fraction of shares owned by managers and board members takes a positive sign and is statistically significant. This implies that the shareholding by the managers and members of the board will affect a firm’s performance positively. This finding is consistent with what one would expect in that a greater ownership concentration by internal stakeholders may lead to superior performance.