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Government Ownership Effect on Staffing Level and Financial Performance: A Case Study on Kuwaiti Banks

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  • Musaed S. AlAli

    (Department of Insurance and Banking, College of Business Studies, The Public Authority for Applied Education and Training (PAAET), Kuwait)

  • Tariq Saeed

    (Department of Information Science, College of Computer Science & Engineering, Taibah University, Saudi Arabia)

Abstract

It has always been believed that government ownership would lead to overstaffing, inefficiency, and bad financial performance in any organization. This study aims to examine the effect of government ownership on staffing level and the financial performance of Kuwaiti bank over the period 2010-2018. Using panel OLS regression method based on the financial data of ten banks listed at Kuwait stock exchange (KSE), results showed that there was a statistically significant direct relation between government ownership and overstaffing and statistically significant inverse relation between government ownership and the financial performance of banks measured by return on assets (ROA). On the other hand, results showed that there was no relation between overstaffing and the financial performance of Kuwaiti banks. Results presented in this research shows the roll government ownership plays in inflating staff numbers in Kuwaiti banks for political rather than economic reasons and also the government influence on the decision making process in these banks resulting in lower financial performance.

Suggested Citation

  • Musaed S. AlAli & Tariq Saeed, 2020. "Government Ownership Effect on Staffing Level and Financial Performance: A Case Study on Kuwaiti Banks," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(3), pages 99-104, July.
    • Handle: RePEc:rbs:ijfbss:v:9:y:2020:i:3:p:99-104
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    References listed on IDEAS

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    1. Kun Tracy Wang & Greg Shailer, 2018. "Does Ownership Identity Matter? A Meta‐analysis of Research on Firm Financial Performance in Relation to Government versus Private Ownership," Abacus, Accounting Foundation, University of Sydney, vol. 54(1), pages 1-35, March.
    2. Musaed S AlAli & Sundus Al-Yatama, 2019. "Analyzing the Financial Soundness of Kuwaiti Banks Using CAMELS Framework," Financial Risk and Management Reviews, Conscientia Beam, vol. 5(1), pages 55-69.
    3. James R. Barth & Gerard Caprio Jr. & Ross Levine, 2001. "Banking Systems around the Globe: Do Regulation and Ownership Affect Performance and Stability?," NBER Chapters, in: Prudential Supervision: What Works and What Doesn't, pages 31-96, National Bureau of Economic Research, Inc.
    4. Cornett, Marcia Millon & Guo, Lin & Khaksari, Shahriar & Tehranian, Hassan, 2010. "The impact of state ownership on performance differences in privately-owned versus state-owned banks: An international comparison," Journal of Financial Intermediation, Elsevier, vol. 19(1), pages 74-94, January.
    5. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, April.
    6. Musaed S. AlAli & Sundus Al-Yatama, 2019. "Analyzing the Financial Soundness of Kuwaiti Banks Using CAMELS Framework," Financial Risk and Management Reviews, Conscientia Beam, vol. 5(1), pages 55-69.
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