An investigation into the effect of foreign ownership on bank performance: The case of Stanbic Bank Zimbabwe Limited

Abstract

Foreign bank entrants into developing economies and emerging markets are usually thought to improve the condition and performance of acquired institutions, and more generally to enhance local financial stability (Crystal, Dages and Goldberg, 2001). This study examines the effect of foreign ownership and central control on foreign owned subsidiary banks and financial performance in Zimbabwe during the period 2009-2012. It focuses on a specific case of Stanbic Bank Zimbabwe (SBZ) which is a subsidiary of Standard Bank South Africa (SBSA). To measure and indicate the financial performance, a number of performance indicators were discussed including return on equity, return on assets, EVA, the CAMELS model. The CAMELS model was discussed at length and its factors became the bases of performance evaluation done in the study. The study has used both primary and secondary data. The secondary data was obtained from bank documents, annual reports, and industry performance reports in Zimbabwe. Primary data on the effects of central control on performance was collected using a free response questionnaire. By applying the descriptive data analysis and literature review methods of analysis, the study found that foreign ownership and centralized foreign control has both positive and negative effects on performance but largely the former. The research concludes that SBSA should maintain central control but giving some autonomy to the resident management on matters that require urgent attention and also allow innovation and market specific technological adaptations which will not only make SBZ more competitive but also a market leader.