EFFECT OF OWNERSHIP STRUCTURE ON PERFORMANCE OF FINANCIAL INSTITUTIONS

2017 ◽  
Vol 2 (7) ◽  
pp. 48
Author(s):  
Fredrick Kiprop Lagat ◽  
Dr. Joel Tenai
Keyword(s):  
Financial Institutions ◽  
Ownership Structure ◽  
Positive Relationship ◽  
Target Population ◽  
Risk Tolerance ◽  
Policy Implications ◽  
Risk Monitoring ◽  
Industry Performance ◽  
Relationship Performance ◽  
Different Characteristics

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 rejectedUnique 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.

scholarly journals Corporate governance and performance of financial institution

2019 ◽  
Vol 16 (1-1) ◽  
pp. 203-216 ◽  
Author(s):  
Juliet Wakaisuka-Isingoma
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Financial Institutions ◽  
Ownership Structure ◽  
Information Disclosure ◽  
Positive Relationship ◽  
Developing Economies ◽  
Cross Sectional ◽  
Financial Transparency

The role of banking and insurance as an animated component of any economy has been widely recognized in the evolution of literature (Shrutikeerti & Amlan, 2017). The financial liberalization efforts taken by various developing economies had the central bearing on their financial institutions (Shrutikeerti & Amlan, 2016). The development of insurance and banking sectors play an important role in stimulating financial development and consequently the growth of the economy. Enhancing firm performance predicted through ownership structure, information disclosure, financial transparency and board profile safeguards reputation, yields effective risk management systems and yet helps firms achieve their business objectives. The study employed a sample of 103 financial institutions and adopted a descriptive cross-sectional survey design with a Pearson correlation coefficient. Reliability, validity and exploratory factor analysis with principal components and Cronbach’s alpha as well as hierarchical regression was reasonable for analysis but also directed using the Partial Least Square (PLS) modelling which was helpful in attesting the measurement and structural models appropriate for the performance of financial institutions. Reveal a statistically significant and positive relationship between corporate governance and firm performance. PLS modelling assented the structural and measurement models and recognized that corporate governance is statistically significant and predict firm performance through its different constructs of information disclosure, financial transparency, and ownership structure and board profile. Equally, firm performance demonstrated that management efficiency, earnings quality, asset quality, capital adequacy and liquidity were key dimensions. The study was cross-sectional and a longitudinal study is necessary to understand the dynamics of corporate governance and firm performance over a period of time. The results extend the understanding of the role of corporate governance in promoting firm performance in financial institutions. Additionally, the results add evidence to the growing body of research focusing on interdisciplinary aspects as well as the relationship between corporate governance and firm performance. Overall, there is a significant positive relationship between corporate governance and firm performance.

scholarly journals Risk-Intolerant but Risk-Taking—Towards a Better Understanding of Inconsistent Survey Responses of the Euro Area Households

2020 ◽  
Vol 12 (17) ◽  
pp. 6912
Author(s):  
Katarzyna Kochaniak ◽  
Paweł Ulman
Keyword(s):  
Risk Aversion ◽  
Financial Institutions ◽  
Euro Area ◽  
Risk Tolerance ◽  
High Income ◽  
Policy Implications ◽  
Risk Averse ◽  
Risky Assets ◽  
Inconsistent Information ◽  
University Degree

The sustainable development of the EU internal market for retail financial services is based on the rules of ‘suitability’, ‘know your client’, and ‘know your product’. The rules ensure that financial institutions (including banks) offer retail clients only products and services that are adequate to their purposes and preferences, including risk tolerance. Our study, however, concerns households for which the above rules are not valid, since they declare risk aversion and possess risky assets. According to the European Union Markets in Financial Instruments Directive and Regulation (MiFID II and MiFIR), the inconsistent information they provide within survey questions should classify them to more compound suitability assessment procedures. In the study, we use nationally representative data for 16 euro area countries from the second wave of the Eurosystem Household Finance and Consumption Survey. Using logit regression, we identify sets of socio-demographic and socio-economic characteristics conducive to the possession of risky assets by risk-averse households in individual countries. To assess their similarity, we use the hierarchical taxonomic method with Ward’s formula. The results of the study showed that risky assets were primarily possessed by risk-averse households that were characterised by high income, including from self-employment, and reference persons having a university degree and at least 55 years of age. The significance of their other characteristics was mainly shaped at the national level. The clear similarity of sets of the characteristics was confirmed only for a few pairs of countries. The information inconsistency that may result from erroneous self-assessments of being risk-averse was recognised in all countries and most often concerned high-income households with reference persons being males with a university degree. In 11 countries, the reason for this inconsistency could also be the inadequacy of assets held, also among senior households. The results provide insights for practitioners and policy. Identification of households providing inconsistent information to financial institutions, with the recognition of its reasons based on easily verifiable characteristics, may prove helpful in suitability assessments. The results confirming the similarity of household profiles requiring special attention between countries may be useful for entities operating cross-border. Due to the collection of information on risk aversion based on the single question self-classification method, conclusions regarding the restrictions of its use should also be considered relevant. In turn, policy implications may relate to consumer protection, since significant fractions of risk-averse households indeed participate in risky assets. Moreover, in selected countries, the risk-averse senior households were recognised as susceptible to making wrong investment decisions.

scholarly journals Corporate governance system in Italy: Compliance and quality

2019 ◽  
Vol 16 (1-1) ◽  
pp. 217-233 ◽  
Author(s):  
Fabio Rizzato ◽  
Donatella Busso ◽  
Alain Devalle ◽  
Alessandro Zerbetto
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Financial Institutions ◽  
Ownership Structure ◽  
Information Disclosure ◽  
Positive Relationship ◽  
Developing Economies ◽  
Cross Sectional ◽  
Financial Transparency

The role of banking and insurance as an animated component of any economy has been widely recognized in the evolution of literature (Shrutikeerti & Amlan, 2017). The financial liberalization efforts taken by various developing economies had the central bearing on their financial institutions (Shrutikeerti & Amlan, 2016). The development of insurance and banking sectors play an important role in stimulating financial development and consequently the growth of the economy. Enhancing firm performance predicted through ownership structure, information disclosure, financial transparency and board profile safeguards reputation, yields effective risk management systems and yet helps firms achieve their business objectives. The study employed a sample of 103 financial institutions and adopted a descriptive cross-sectional survey design with a Pearson correlation coefficient. Reliability, validity and exploratory factor analysis with principal components and Cronbach’s alpha as well as hierarchical regression was reasonable for analysis but also directed using the Partial Least Square (PLS) modelling which was helpful in attesting the measurement and structural models appropriate for the performance of financial institutions. Reveal a statistically significant and positive relationship between corporate governance and firm performance. PLS modelling assented the structural and measurement models and recognized that corporate governance is statistically significant and predict firm performance through its different constructs of information disclosure, financial transparency, and ownership structure and board profile. Equally, firm performance demonstrated that management efficiency, earnings quality, asset quality, capital adequacy and liquidity were key dimensions. The study was cross-sectional and a longitudinal study is necessary to understand the dynamics of corporate governance and firm performance over a period of time. The results extend the understanding of the role of corporate governance in promoting firm performance in financial institutions. Additionally, the results add evidence to the growing body of research focusing on interdisciplinary aspects as well as the relationship between corporate governance and firm performance. Overall, there is a significant positive relationship between corporate governance and firm performance.

scholarly journals Ownership Structure and the Risk: Analysis of Indian Firms

2020 ◽  
Vol 8 (1) ◽  
pp. 39-52
Author(s):  
Ranjita Kumari ◽  
Nishant Kumar
Keyword(s):  
Financial Institutions ◽  
Ownership Structure ◽  
Risk Taking ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Positive Association ◽  
Risk Averse ◽  
Positive Relation ◽  
Negative Effects ◽  
High Return

AbstractConsidering the positive relationship between ownership and firm performance in the corporate finance literature, the paper aims to investigate the effect of ownership structure on the risk associated with the firm. Portfolio theories state that an investment with a high return is expected to be associated with high risk; so, it can be argued that ownership should have a positive relation with risk too. However, another explanation is that since large shareholders, such as promoters and financial institutions, have a significant stake in firms, in developing countries like India they will avoid excess risk taking, and so there should be a negative relationship between ownership and risk associated with firms. Analysing Nifty-500 companies for the period of 2006/07–2015/16, the study has found that Indian blockholders are in general risk-averse. Results also suggest that profitability and growth opportunities have negative effects on risk, which again establishes the positive association between ownership structure and profitability.

scholarly journals EFFECT OF INFORMATION SHARING FUNCTION ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES

2017 ◽  
Vol 1 (5) ◽  
pp. 49 ◽  
Author(s):  
Jackson Mnago Ndungo ◽  
Dr. Olweny Tobias ◽  
Dr. Memba Florence
Keyword(s):  
Financial Performance ◽  
Information Sharing ◽  
Financial Institutions ◽  
Positive Relationship ◽  
Secondary Data ◽  
Target Population ◽  
Primary Data ◽  
Top Managers ◽  
Sharing Function ◽  
Business Entities

Purpose: The objective of the study was to establish effect of credit information sharing on financial performance of SACCOs in Kenya. Studies have indicated that countries are establishing credit registries to reduce defaults, caused by information asymmetry, which have been a crisis for most financial institutions. Various financial institutions including SACCOs which have the business of lending are currently subjecting their customers in credit reference bureaus. Literature indicates that credit defaults have continued to pose financial crisis for financial institutions. Many studies done indicate that credit default is caused by lack or inadequate accurate credit information. In Kenya, through the Banking Act of 2009 saw the establishment of the first credit reference bureau in 2010 where individuals and business entities were to be subjected to CRBs. This study sought to establish the effect of information sharing on financial performance of SACCOs in Kenya. The study adopted a descriptive research design which was both quantitative and qualitative. The target population was 181 and a sample of 135 (74.5%) licensed deposit taking SACCOs as at 31st December 2014 was used. The choice of the licensed deposit taking SACCOs in Kenya was very objective since they offer employment opportunities for our youth. In most cases SACCOs deal with a larger group of clients from the informal sector as opposed to other financial institutions like banks and so it was possible to obtain information that is representative of Kenya. Secondary data was collected from published financial records and CRBs while primary data was collected through questionnaires which were administered to the top managers of the SACCOs. The study established that credit information sharing has a significant and positive relationship with financial performance of the sampled SACCOs. The study highlights effect of credit information sharing with possible recommendations for improvement on financial performance.Findings: The study concluded that there was a significant and positive relationship between information sharing function and financial performance thus the existence of credit reference bureaus was suitable for improving financial performance of SACCOs. Thus Credit reference bureaus have led to share of negative credit reports; Credit reference bureaus have led to improved defaults rate of borrowers, improved lenders response rate on credit lending and have reduced existence of privacy on borrowers’ credit history.Recommendation: Credit information sharing should be addressed through networking of all credit information amongst lenders so that lenders can have readily available credit information, both positive and negative, on the borrowers which would be shared across all lenders.

scholarly journals Financial literacy and financial behavior with the mediating effect of family financial socialization in the financial institutions of Lahore, Pakistan

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Sumaira Khawar ◽  
Aamir Sarwar
Keyword(s):  
Financial Institutions ◽  
Financial Literacy ◽  
Positive Relationship ◽  
Financial Education ◽  
Target Population ◽  
Mediating Effect ◽  
Test Reliability ◽  
Financial Behavior ◽  
Primary Data ◽  
Financial Socialization

Abstract Purpose The main purpose of this study was to find out the relationship between financial literacy and financial behavior and to discover the mediating influence of family financial socialization on this relationship. The study also particularizes that how personal knowledge of finance of an employee and whatever they have learned through family socialization will help them to make sound decisions having a financial impact on them and their family. Design/methodology/approach Employees of financial institutions employed and residing in Lahore, Pakistan, were the target population of this report. It was a cross-sectional quantitative research study. By using a detailed questionnaire, primary data were obtained. The sample size was 330; through convenience sampling, employees employed in banks were chosen. Descriptive analysis, parametric test, reliability test, and correlational examination with the aid of SPSS 23 and the use of SmartPLS 3.0. are knowledge investigation techniques used in this examination study to infer outcomes. Results/findings The outcomes which are created from this exploration include: (1) there was no distinction in the financial conduct of representatives from various socioeconomics gatherings. Financial education has a critical positive relationship with financial behavior. (2) Family financial socialization additionally shows a huge positive relationship with financial education and financial behavior. (3) Financial education demonstrated a remarkable abnormal impact on financial behavior through family financial socialization. (4) Family financial socialization shows partial mediation between financial literacy and financial behavior. We can accomplish that formal, as well as informal, training of finance decides the financial behavior of people. Originality/value This study is the first of this kind to examine the association between financial literacy, and financial behavior using family financial socialization as a mediator and employees of financial institutions as the target population.

Effects of Financial Innovations on Profitability for Deposit Taking Microfinancing Institutions in Kenya

2018 ◽  
Vol 9 (6) ◽  
pp. 529-536
Author(s):  
Martin Khoya Odipo ◽  
Keyword(s):  
Financial Institutions ◽  
Positive Relationship ◽  
Financial Institution ◽  
Secondary Data ◽  
Financial Statements ◽  
Descriptive Statistics ◽  
Primary Data ◽  
Microfinance Institutions ◽  
Financial Innovations ◽  
Strong Positive Relationship

Recent studies have documented that innovations improve profitability of firms. This article documents that deposit taking micro financial institutions that have adopted financial innovations have increased their profitability. The study covered five years between 2009-2013. Both primary and secondary data were used in the study. Primary data was obtained through administration of drop and pick questionnaires to selected employees of the institutions. Secondary data was obtained from financial statements and management reports of these deposit taking microfinance institutions. Data was analyzed using descriptive statistics, return on asset and multi-liner regression model to determine the effect of each financial innovation applied on profitability on the micro-financial institution. The results showed that most deposit taking microfinance institutions adopted these financial innovations in their current operations. There was strong positive relationship between individual innovations and profitability. In line with profitability ROA also showed improvement each year after the adoption of these financial innovations.

How does ownership structure affect the financing and dividend decisions of firm?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tahar Tayachi ◽  
Ahmed Imran Hunjra ◽  
Kirsten Jones ◽  
Rashid Mehmood ◽  
Mamdouh Abdulaziz Saleh Al-Faryan
Keyword(s):  
Ownership Structure ◽  
Dividend Policy ◽  
Generalized Method Of Moments ◽  
Institutional Ownership ◽  
Agency Cost ◽  
Debt Financing ◽  
Policy Implications ◽  
Managerial Ownership ◽  
Content Type ◽  
The Impact

Purpose Ownership structure deals with internal corporate governance mechanism, which plays important role in minimizing conflict of interests between shareholders and management Ownership structure is an important mechanism that influences the value of firm, financing and dividend decisions. This paper aims to examine the impact of the ownership structures, i.e. managerial ownership, institutional ownership on financing and dividend policy. Design/methodology/approach The authors use panel data of manufacturing firms from both developed and developing countries, and the generalized method of moments (GMM) is applied to analyze the results. The authors collect the data from DataStream for the period of 2010 to 2019. Findings The authors find that managerial ownership and ownership concentration have significant and positive effects on debt financing, but they have significant and negative effects on dividend policy. Institutional ownership shows a positive impact on financing decisions and dividend policy for sample firms. Originality/value This study fills the gap by proving the policy implications for both firms and investors, as managers prefer debt financing, but at the same time try to ignore dividend payment. Therefore, investors may not invest in firms with a higher proportion of managerial ownership and may choose to invest more in institutional ownership, which lowers the agency cost.

The Relation Between Stock Repurchase And Ownership Structure In France

2013 ◽  
Vol 3 (2) ◽  
pp. 149
Author(s):  
Rim El Houcine ◽  
Adel Boubaker
Keyword(s):  
Ownership Structure ◽  
Institutional Investors ◽  
Positive Relationship ◽  
Stock Repurchase ◽  
Interest Alignment ◽  
The Relationship

The aim of this article is to study the relationship between the type of shareholders of French companies and their stock repurchase policy. According to the financial theory, the presence of institutional investors negatively influences the policy of purchasing the fact of preference of these investors over the reinvestment projects. The theoretical hypotheses of interest alignment and entrenchment have been used to justify the relationship between management stockholding and repurchasing policy. We have tested the validity of our hypotheses on a sample of 77 French companies during 2003-2008. The results have shown that the institutional investors affect negatively the repurchase, which can explain the priority of these latter for dividends compared to repurchasing and with holding the profit to invest it again. Moreover, we have found a positive relationship between the management stockholding and the repurchase, which has been explained by the power of entrenchment that can perform the repurchase by raising the stockholding percentage of managers who repurchase the stocks.

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