Ownership structure and bank financial performance in Kenya

Abstract

This study examined ownership structure of commercial banks in Kenya and also established whether a relationship exists between ownership structure and bank financial performance. Various forms of ownership structure (foreign vs. local, institutional vs. individual, non-government vs. government and listed on NSE vs. unlisted) were examined and their relationship with bank financial performance determined. Data on ownership structure was compiled from records available at the Registrar of Companies. The basic statistical method employed to establish the relationship between ownership structure and financial performance was the Chisquare test of independence. The study established the following about ownership of commercial banks in Kenya:- • 67% are wholly locally owned, 23% partially foreign and partially locally owned and 10% are entirely foreign owned, • 42% are wholly institutionally owned, 52% partially institutionally and partially individually owned while none are entirely individually owned, • 86% have no government ownership, 10% are partially government and partially nongovernment owned and only 4% are entire government owned, • 85% of the banks in Kenya are not listed on the NSE, -1.3% are partially listed and only one bank representing 2% is entirely listed Further, only foreign vis-a-vis local ownership was found to have a significant relationship with financial performance. It is expected that results of the study will offer useful insight as to what aspects of ownership structure have some significant relationship to bank financial performance; information that is important to guard against financial crises in the Kenyan banking