This question impelled the study to focus on two expectations. In the context of the agency theory, the study explored a critical question, whether ownership structure is a key component in enhancing financial performance. Ownership structure in banks influences corporate governance, corporate strategy and performance. The form of ownership structure in a bank dictates and provides the level of influence and control one has on management of the bank in making vital decisions. Ownership structure of a firm plays a great role in decision making and cost control. As noted by, this conflict lowers the value of the firm when managers put their interest before those of the owners. Ownership structures lead to agency problems resulting from conflicts between management and shareholders. Board decisions are influenced by corporate governance mechanisms which are based on ownership structures in place by firms. Ownership structure reveals the distribution of equity in a firm and the identity of the equity owners. Ownership structure and performance is a contentious issue that has been a subject of debate in all businesses globally. The authors in argued that this relationship depends on the various types of ownership structures that exist in different firms. This concern comes from the fact that ownership structure influences firm’s corporate governance on major decisions thereby impacting on the firms’ financial performance. Globally, the relationship between ownership structure and financial performance has been of primary concern to scholars, management, academics, policy makers and investors for decades. This is because different ownership structures can be applied in countering the agency problems, thereby boosting the relationship between the firm’s management and other stakeholders of the firm. Ownership structure represents a powerful means for the firm’s management to exercise control to improve performance.
To enhance financial planning in many firms, ownership structure is a vital component and is used by many firms’ directors since any firm’s board efficiency hangs on the overall diversity of the ownership structure. Ownership structure is one of the major tools applied to enhance performance in many firms across the globe. Lastly, the study proposes that bank’s management to come up with a policy detailing the role and place of foreign investors in strategic decision making to ensure their presence in every decision undertaken by bank managers.įirms use many tools to enhance and promote their performance. Fourth, the study proposes a percentage limit on equity stock of an individual institutional investor. Third, banks should adopt managerial ownership policy limiting the proportion of equity stock on executives to limit their powers in strategic decision making. Secondly, banks with high percentage of state ownership should consider partial privatization to improve corporate governance practices. Based on the findings, commercial banks should vary their ownership structures to boost financial performance. The results found a negative association between state ownership and net interest margin, negative association between management ownership and both net interest margin and earnings per share, negative association between institutional ownership and return on assets and a negative association between foreign ownership and earnings per share. Influence of ownership structures was found to be low on return on equity at 3.32% and earnings per share at 2.13%. The results established that the greatest influence of ownership structures was on net interest margin at 53.04% and return on assets at 31.37%. Regression results found strong evidence on ownership structures in explaining the differences in commercial banks’ financial performance. The data were collected from audited financial statements of 39 commercial banks in Kenya. The study examined the relationship between ownership structure and financial performance of commercial banks in Kenya for the period 2009–2020.
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