EFFECT OF OWNERSHIP STRUCTURE ON PERFORMANCE OF FINANCIAL INSTITUTIONS

Abstract

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.