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Effect of Ownership, Capital and Cost Structures on Financial Performance of Commercial Banks in Kenya

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dc.contributor.author Maina, Eliud Kagema
dc.date.accessioned 2017-10-06T07:55:17Z
dc.date.available 2017-10-06T07:55:17Z
dc.date.issued 2017
dc.identifier.uri http://erepo.usiu.ac.ke/11732/3370
dc.description A Research Report Submitted to the Chandaria Business School of Business in partial Fulfilment of the Requirement for the Degree of Masters in Business Administration (MBA) en_US
dc.description.abstract Financial performance of commercial banks is very important since banks play an important financial intermediation role in the economy. One of the determinants of commercial banks’ financial performance is the banks’ ownership structure, the capital structure, and the cost structure and this was the focus of the study. The objective of the study sought to address the following three research questions in the context of Kenya; How does the ownership structure of banks affect financial performance? How does the capital structure of commercial banks affect the bank performance, and finally, how does the cost structure of the bank affect financial performance? ROA and ROE was used to assess financial performance. This research applied descriptive and inferential statistics to determine the relationship between the independent variables and the dependent variables of the three objectives. A descriptive research design was applied to a population of forty two commercial banks operating in Kenya. Secondary data was used and was collected from banks’ published annual reports and financial reports. Regression and correlation analyses was used and based on the association among the variables. The software SPSS was the analysis tool for this study. The study aimed to bridge the knowledge gap on some of the elements influencing financial performance and profitability of commercial banks in Kenya and seeks to be of benefit to the commercial banks, regulatory bodies, government, and investors. The study findings indicated that ownership structure has a significant impact on both return on assets and return on equity. Private-public ownership had a significant impact on financial performance but foreign-local ownership did not have a significant impact on financial performance. Capital structure also had a significant impact on both return on assets and return on equity, with debt-to-total assets ratio having a significant effect on return on assets, but had no significant effect on debt-to-total equity ratio. With regards to the third objective, the study found that cost structure had a significant effect on both return on assets and return on equity, with loan loss-to-income ratio the only variable having a significant effect on return on assets, while all the three variables, had a significant effect on the return on equity. The study recommended that proper management guidelines should be provided for both public and private commercial banks since private-managed banks perform better than public-managed. Proper governance and use of Acts such as the Sarbanes-Oxley Act and the Cadbury report are important for management of banks. The study also recommended that individual banks should identify their optimal level of external debt by analysing the costs and the benefits in order to maximize profitability. Finally, the study recommended that operational costs should be minimized without interfering with the quality of service, and proper vetting of loan applicant should be done to minimize loan losses. en_US
dc.language.iso en en_US
dc.publisher United States International University - Africa en_US
dc.subject Ownership en_US
dc.subject Capital and Cost Structures en_US
dc.subject Financial Performance en_US
dc.subject Commercial Banks in Kenya en_US
dc.title Effect of Ownership, Capital and Cost Structures on Financial Performance of Commercial Banks in Kenya en_US
dc.type Thesis en_US


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