Title :	Ownership concentration and bank performance of commercial banks of Nepal
Material Type:	printed text
Authors:	Anushuya Dahal, Author
Publication Date:	2017
Pagination:	105p.
Size:	GRP/Thesis
Accompanying material:	8/B
Languages :	English
Descriptors:	Stock ownership
Class number:	658.152
Abstract:	Banks are a sensitive breed of financial institutions that take people’s money and invest in productive sectors. Depositors do not oversee their investment practices and banks practically enjoy a trust and fellowship from the society. Therefore, regulators, economists as well as market community are disproportionately sensitive towards banks performance (Rahman & Maruf, 2013). Ownership concentration shows the level of dispersion in a certain ownership category among banks, which, when studied should give the effect of most dominant group (Pedersen & Thomsen, 1999). Ownership composition shows the nature of the owners. Both of these two variables contain important information regarding a bank’s performance. A firm ownership structure can be defined along two main dimensions. First, the degree of ownership concentration: firms may differ because their ownership is more or less dispersed. Second, the nature of owners, given the same degree of concentration, two firms may differ if the government holds a majority of the stake in one of them; similarly, a stock firm with dispersed ownership is different from a mutual firm (Iannotta, et al. 2007). Many studies have been undertaken to study the impact of ownership concentration in developed countries but in Nepal there are few studies which have been conducted on this issue. This study investigates the relationship between ownership concentration and bank performance in selected Nepalese commercial banks. Ownership concentration and structure are considered as important factors that affect a firm’s health. If the ownership structure and concentration affects a firm’s health, then it is possible to use the ownership concentration and structure to predict the probability of default. Empirical studies on the relationship between the firm’s ownership concentration and performance have produced mixed results. Ownership concentration is one of the main dimensions of corporate governance and is widely seen to be determined by country-level corporate governance characteristics such as development of the stock market and the nature of state intervention and regulation (Porta, et al., 1998). Themajor objective of this study is toexamine the impact of ownership concentration, ownership structure and other bank specific factors on the financial performance of commercial banks of Nepal. The specific objectives of the study are (a) To analyze the structure and pattern of return on assets, net interest margin, ownership concentration, debt ratio and bank size. (b) To examine the effect of ownership concentration and ownership structure on the performance of commercial banks of Nepal. (c) To find out the effect of bank specific control factors such as debt ratio, bank size and bank age on the performance of commercial banks of Nepal. (d) To determine the most influential concentration factors affecting the performance of commercial in banks. The study is based on pooled cross-sectional data of 21 commercial banks for the period of 2008/09 to 2014/15 leading to a total of 147 observations. The data are collected from Banking and Financial Statistics published by Nepal Rastra Bank and annual reports of the selected commercial banks. The dependent variables are return on assets and net interest margin whereas the independent variable are ownership concentration, ownership structure and bank specific control variables. Ownership concentration is measured using two variables and they are: summation of percentage of shares held by top five shareholders and large ownership defined is at least one owner with shareholdings greater than 25%. Likewise, ownership structure has been categorized as foreign ownership, private ownership and government ownership. Descriptive research design and causal comparative research design has been employed in order to analyze the impact of ownership concentration on performance of commercial banks in Nepal. The study reveals that ownership concentration is positively related to bank performance. It indicates that an increase in ownership concentration leads to increases in return on assets and net interest margin. Likewise, the study found that debt ratio is negatively related to the bank performance, it indicates that higher the debt ratio, lower would be the performance of the banks. Similarly, bank age is positively related to bank performance. It indicates that older the bank, higher the bank performance would be. The regression results show that beta coefficients for ownership concentration is positive. However, the coefficients are not significant. Likewise, results show that there is a negative and significant beta coefficient of private ownership with return on assets at 5 percent level of significance. Therefore, this study concludes that ownership concentration has no impact on performance of the Nepalese commercial banks rather ownership structure affects the performance.

Ownership concentration and bank performance of commercial banks of Nepal [printed text] / Anushuya Dahal, Author . - 2017 . - 105p. ; GRP/Thesis + 8/B.
Languages : English

Descriptors:	Stock ownership
Class number:	658.152
Abstract:	Banks are a sensitive breed of financial institutions that take people’s money and invest in productive sectors. Depositors do not oversee their investment practices and banks practically enjoy a trust and fellowship from the society. Therefore, regulators, economists as well as market community are disproportionately sensitive towards banks performance (Rahman & Maruf, 2013). Ownership concentration shows the level of dispersion in a certain ownership category among banks, which, when studied should give the effect of most dominant group (Pedersen & Thomsen, 1999). Ownership composition shows the nature of the owners. Both of these two variables contain important information regarding a bank’s performance. A firm ownership structure can be defined along two main dimensions. First, the degree of ownership concentration: firms may differ because their ownership is more or less dispersed. Second, the nature of owners, given the same degree of concentration, two firms may differ if the government holds a majority of the stake in one of them; similarly, a stock firm with dispersed ownership is different from a mutual firm (Iannotta, et al. 2007). Many studies have been undertaken to study the impact of ownership concentration in developed countries but in Nepal there are few studies which have been conducted on this issue. This study investigates the relationship between ownership concentration and bank performance in selected Nepalese commercial banks. Ownership concentration and structure are considered as important factors that affect a firm’s health. If the ownership structure and concentration affects a firm’s health, then it is possible to use the ownership concentration and structure to predict the probability of default. Empirical studies on the relationship between the firm’s ownership concentration and performance have produced mixed results. Ownership concentration is one of the main dimensions of corporate governance and is widely seen to be determined by country-level corporate governance characteristics such as development of the stock market and the nature of state intervention and regulation (Porta, et al., 1998). Themajor objective of this study is toexamine the impact of ownership concentration, ownership structure and other bank specific factors on the financial performance of commercial banks of Nepal. The specific objectives of the study are (a) To analyze the structure and pattern of return on assets, net interest margin, ownership concentration, debt ratio and bank size. (b) To examine the effect of ownership concentration and ownership structure on the performance of commercial banks of Nepal. (c) To find out the effect of bank specific control factors such as debt ratio, bank size and bank age on the performance of commercial banks of Nepal. (d) To determine the most influential concentration factors affecting the performance of commercial in banks. The study is based on pooled cross-sectional data of 21 commercial banks for the period of 2008/09 to 2014/15 leading to a total of 147 observations. The data are collected from Banking and Financial Statistics published by Nepal Rastra Bank and annual reports of the selected commercial banks. The dependent variables are return on assets and net interest margin whereas the independent variable are ownership concentration, ownership structure and bank specific control variables. Ownership concentration is measured using two variables and they are: summation of percentage of shares held by top five shareholders and large ownership defined is at least one owner with shareholdings greater than 25%. Likewise, ownership structure has been categorized as foreign ownership, private ownership and government ownership. Descriptive research design and causal comparative research design has been employed in order to analyze the impact of ownership concentration on performance of commercial banks in Nepal. The study reveals that ownership concentration is positively related to bank performance. It indicates that an increase in ownership concentration leads to increases in return on assets and net interest margin. Likewise, the study found that debt ratio is negatively related to the bank performance, it indicates that higher the debt ratio, lower would be the performance of the banks. Similarly, bank age is positively related to bank performance. It indicates that older the bank, higher the bank performance would be. The regression results show that beta coefficients for ownership concentration is positive. However, the coefficients are not significant. Likewise, results show that there is a negative and significant beta coefficient of private ownership with return on assets at 5 percent level of significance. Therefore, this study concludes that ownership concentration has no impact on performance of the Nepalese commercial banks rather ownership structure affects the performance.