Ownership Structure, Bank Stability and the Financial Performance of Commercial Banks in South Sudan

Since independence in 2011, the Republic of South Sudan has witnessed growth in the financial systems and the overall economy. This has led to growth in the number of financial institutions in the country. There is however minimal research on their overall performance. Hence the current research sought to determine the effect of ownership structure, bank stability and the financial performance of commercial banks in South Sudan. The population for the study was all the 29 commercial banks in South Sudan. Secondary data was collected for the period 20122017 from audited annual financial reports of individual banks and the Central Bank of South Sudan reports while primary data was collected by the use of a semi-structured questionnaire. Collected data was edited, sorted and coded into SPSS 23 for subsequent data analysis using SPSS 23 statistical analysis tool. This research utilized both descriptive and inferential statistical methods in the analysis. Statistical tests to be utilized in the study included t-tests, ftest, regression models and ANOVA models. Findings of the research were presented using frequencies, percentages, means, standard deviation, correlation coefficients, charts, tables, and other statistical measures. Results of the study indicated there was a statistically significant moderating effect of ownership structure on the financial performance of commercial banks in South Sudan. This study recommends that the government should adopt better measures to safeguard public-owned commercial banks to improve their efficiency and performance.


Introduction
The main aim of commercial banks is to register better performance through sustained profitability and growth (Pearce & Robinson, 2011). However, attempts to realize such successes, are often affected by multiple operating market conditions such as the level of competition, stakeholders management, political landscape, business legal regime, the cost of doing business, new innovative products, internal organizational structure, emerging technologies, and effects of globalization (Kotler & Armstrong, 2013). Banking is a critical sector in an economy and its performance should be monitored closely to safeguard the interest of a countries economy (Al Mamun, 2013). Banks are catalysts of economic growth through the provision of financial services to the citizenry. Profitable performance of banks translates to economic growth and stability of an economy through financial sector stability (Beck, Hesse, Kick, & Westernhagen, 2009). Also, good performance of commercial banks is a key factor for a robust financial system which can withstand volatility and shocks in the economy; however, poor performance can contribute to major financial crisis especially within emerging economies (Nimalathasan, 2008).
In recognition of the vital role the banking sector plays in economic development, there has been an upsurge of initiatives by Central Banks and Reserve Banks alongside other institutions worldwide such as the Basel Committee on Banking and Supervision and OECD to provide governance principles with a view of enhancing management and performance of this important sector. Most of these initiatives have prominently featured in developed nations such as U.S.A., United Kingdom, Germany, Canada, and France among others with South Africa taking a lead in addressing corporate governance issues among developing nations in Africa (Elewechi, 2007). According to World Bank (2013), there were over 10,000 operational commercial banks spread across the globe by December 2012. Out of these, 60% were located in developing countries which account for 80% of the total world population. Africa accounted for about 12% of this total, Asian country having 70%, and Latin America accounted for 17%. Ndoka, Islami, and Shima, (2017) acknowledged that commercial banks across the globe have been reeling from the chaos that erupted in the financial sector during the global financial crisis. This coupled with increasing internal pressures this has posed tremendous challenges on the financial soundness of commercial banks. Bekele (2015) further notes that poor financial risk management practices are lack of adequate internal controls have negatively impacted the financial performance of commercial banks. Jima and Raju (2015) concluded that external environment has been one of the main challenges that have been affecting the banking sector operations within commercial banks in East Africa.
In a study on the performance of commercial banks in Sri Lanka; Seelanatha (2010) indicated that the performance of commercial banks was dependent on the level of the institutional efficiency. On the other hand, Jaber and Al-Khawaldeh (2014) sought to examine the factors contributing to positive profitability within the banks in Jordan. Findings from the study indicated that external factors such as inflation, Gross Domestic Product and the capital market capitalization have a strong impact on the performance of commercial banks. Nasserinia, Ariff and Fan-Fah (2014) studied how internal factors affect the performance of commercial banks in Japan. Findings from the study indicated that there was a negative relationship between capital adequacy, credit risk and performance of banks while management efficiency, liquidity and asset quality had a positive influence on the performance of commercial banks.
Evidence from developing economies (Yener & David, 2008); indicate that a stable banking system is integral to promoting economic growth and development of institutions within the country. Abera (2012) indicates that internal bank-specific factors are key to fostering the stability of commercial banking institutions. Beck, Hesse, Kick, and Westernhagen (2009) concluded that the stability of financial institutions is a key indicator of a well functioning economic system. Fang, Hasan, and Marton, (2014) indicate that a sound and stable financial sector in transition economies is essential for promoting institutional development and firm performance. According to the IMF (2017), Article IV consultation press report; the republic of South Sudan has been experiencing macroeconomic imbalances which have dampened the ongoing macroeconomic stability endeavours and the structuring of the country's financial sector. The report further indicates that through regulatory mechanisms commercial banks have been required to adhere to statutory requirements on minimum capital which has reduced vulnerabilities in the banking sector. However, despite setting up the minimum capital requirements for both foreign-owned and locally-owned banks only about half of the banks have been able to meet the requirements. The banking industry in the country is populated by regional banks mostly from Kenya which have been achieving relatively better performance than indigenous banking institutions in the country (FSNWG, 2015). The current study sought to examine how the ownership structure and bank stability affect the financial performance of commercial banks.

Literature Review
Sharma and Arora (2016) conducted a study Performance of Indian Banks: A Camel Model Approach. The study utilized data from 8 public sector banks and 7 private sector banks. The study further adopted a descriptive research design with only secondary data being utilized. The results of the study revealed that based on the CAMEL model indicators private banks were better ranked than public sector banks. In an IMF working paper, Robert, Maria, Martinez, and Jeanne, (2017); examined the bank ownership; trends and implications within countries across the world. The findings of the review indicated that foreign-owned banks are more performing than domestically owned banks within developing countries. However, due to imported external shocks by foreign banks the foreign-owned banks may not be always better performing. The findings also indicated that government-owned banks had fewer benefits within developing countries due to corruption, bureaucracy and poor reform processes.
James and Shaban (2017) examined the effects of ownership change on bank performance and risk exposure: Evidence from Indonesia. The study sampled 60 commercial banks in Indonesia and utilized panel data for the period 2005-2012. The study utilized multiple linear regression methods to estimate the effects of ownership on the performance and risk exposure of commercial banks. Result of the regression indicated that state-owned banks tend to be less profitable and more exposed to risk than private and foreign banks. The findings of the study further indicated that Non-regional foreign acquisition is associated with a reduction in risk exposure. Acquisition by regional foreign investors is associated with performance gains. Akhigbe, McNulty, and Stevenson (2017) conducted a study exploring whether the form of ownership affects firm performance? Evidence from US bank profit efficiency before and during the financial crisis. The study utilized panel data to examine the differences between privately held and publically traded bank holding companies (BHCs). The findings indicated that there were small differences between privately held and publicly held banking companies during the pre-crisis period however during the crisis period there were no statistically significant differences.
Garba and Mohamed (2017) conducted a study examining the impact of foreign ownership on the going-concern of Nigerian Listed Banks. Data was collected from the annual reports and financial statement of 15 listed commercial banks from 2011 to 2015. The analysis of the collected data was conducted using descriptive statistics, Pearson correlation, along with fixedeffect and random-effect generalized least square (GLS) regression techniques. The results of the analysis indicated that there was a significant positive relationship between foreign ownership and going concern of listed Banks in Nigeria.
Ermias (2016) examined the financial performance of private commercial banks in Ethiopia using a CAMEL approach. The research utilized a fixed least square method for estimation for the considered banks only. The results of the study indicated that the CAMEL model aspects had a comparative influence of 67.5% of the influence on bank profitability. In another study, Kijjambu and Ddumba-Ssentamu (2015) examined increased foreign commercial banks and the performance of domestic commercial banks in Uganda. The study utilized descriptive statistics for the period 2000-2011 with the performance trend divided into periods. The findings of the study indicated that with increased foreign-owned commercial banks enhanced the liquidity position, deposits and interest income for domestic banks. The study findings also indicated that policy implications brought forward by foreign-owned banks enhanced the commercial banking sector development. Kiruri (2013) examined the effects of ownership structure on the bank profitability in Kenya. The study utilized data from Kenyan commercial banks for the period 2007-2011 and conducted a multiple regression model. The study found out that state ownership had a significant negative influence on the profitability of commercial banks. The study findings also indicated that foreign ownership and domestic ownership was highly correlated to positive and significant influence on bank profitability. In general, the study indicated that higher concentration of ownership and state ownership was associated with lower profitability.

Research Methods
Research philosophy refers to the assumptions and beliefs that govern the way we view the world (Saunders et al., 2007). This research was grounded on positivism research philosophy. This kind of philosophy calls for the research problem to be structured around a methodology that enabled the research to generate quantifiable observations and undertake manipulation of the data by the use of statistical methods. According to Sekaran (2003) research design is a set of decision that makes up the master plan specifying the methods and procedures for collecting and analysing the needed information. This study adopted a descriptive survey research design. Kothari (2008) indicates that the population of research represents all the items, objects or individuals who are of relevance to the research study. In the current study, the unit of analysis was the individual commercial bank organizations operating in South Sudan. There are 29 indigenous and foreign banks operating in South Sudan.
Baxter and Jack (2008) define data collection as the precise, systematic gathering of information relevant to the research sub-problems, using methods such as interviews, participant observations, focus group discussion, narratives and case histories. Secondary data was collected from government records, banks financial reports and other official publications. The secondary data was sourced from the financial year 2012-2017 to ensure that the records formalization since 2012 marked the first financial year since Independence of South Sudan was in 2011. Quantitative data were analysed using descriptive analysis and inferential analysis techniques with the help of Statistical Packages for Social Sciences (SPSS Version 23). Descriptive analysis included percentage, frequencies, means and standard deviations on the research variables. Inferential statistics will include multiple regression analysis and correlation to estimate the level of association between the research variables. The analysed data was presented using charts and tables as well as other infographics deemed appropriate.

Descriptive Analysis South Sudan Banking Industry Analysis
Study sought to establish the link between bank stability and the financial performance of commercial banks in South Sudan. The research utilized the CAMEL model as the indicators of the financial performance of commercial banks and the return on assets and return on equity as the measures of the financial performance of commercial banks. The study was conducted across 24 commercial banks in South Sudan for the period 2012-2017. From the 24 commercial banks, the study was able to obtain 137 observations within 6 years period the research data was collected.

Capital Adequacy of Commercial Banks
Results of the study on Table 1

Asset Quality of Commercial Banks
The study sought to examine the asset quality of commercial banks within South Sudan. Asset quality was computed by Level of non-performing loans to the net of provision: Capital. The findings of the study in Table 2

Management Efficiency of Commercial Banks
The study sought to examine the management efficiency of commercial banks within South Sudan. Management efficiency was computed by Personal Expense: Non-Interest Expense. Research findings in Table 3

Earnings of Commercial Banks
The study sought to examine the earnings of commercial banks within South Sudan. The earnings were computed by Interest Margin: Gross Income. The study results in Table 4 Article IV report which showed that earnings within commercial banks in South Sudan have been minimal due to lack of diversification in the product and service offering.

Liquidity of Commercial Banks
The study sought to examine the liquidity of commercial banks within South Sudan. Liquidity was computed by Liquid Asset: Total Asset. The study also sought to examine the liquidity of commercial banks in South Sudan. The results in Table 5  respectively. The findings of the study showed a sharp decrease in liquidity to 69.33 in FY 2016 and slightly rose to 71.48 in 2017. This agrees with IMF (2017) report that shows liquidity has been decreasing within the period in the examination.

Financial Performance of Commercial Banks
The study sought to examine the financial performance of commercial banks within South Sudan. The financial performance of commercial banks was assessed by both ROA (Net Income/Average Assets) and ROE (Net Income/Average Capital). Source: SPSS output The study further examined the financial performance of commercial banks in terms of Return on Assets (ROA) and the Return on Equity (ROE) as shown in Table 6.

Inferential Analysis Regression Results
The main objective of the research was to examine the effect of bank stability on the financial performance of commercial banks in South Sudan. Regression summary results indicated below: Study sought to estimate the relationship between bank stability and the financial performance of South Sudan. The results of regression analysis indicated that 53.9% variation in the financial performance of the banks can be explained by the CAMEL model indicators R 2 = .539 as shown in Table 7. These results are in agreement with (Bekele, 2015; Kabir & Dey, 2014) who indicated that CAMEL model components can explain the financial performance of commercial banks.   Results above on Table 10, indicate a beta value (β) = .583 and is significantly different from 0 since the p-value .000<.005. This indicates that there is a statistically significant positive effect of bank stability on the financial performance of commercial banks. A unit change in bank stability will result in a .583 unit change in the financial performance of commercial banks in South Sudan.

Tests for Moderation Moderating Effect of Joint Venture Ownership on Bank Stability and Financial Performance
Study runs a regression analysis to determine the moderating effect of joint venture ownership structure on the relationship between bank stability and the financial performance of commercial banks. The equation for the interaction was; Y = βo+ β1 (Joint Venture * Bank Stability) + β2 (Joint Venture Ownership) + ε In line with the above results the regression model summary indicates that bank stability without the moderating variable explains 53.9% (R 2 = .539) variations in the financial performance of commercial banks. With the moderating variable factored in the effect improves to 59.8% (R 2 = .598). This implies that the joint ownership structure has a positive effect on the relationship between bank stability and the financial performance of commercial banks in South Sudan. Lawrence (2017) pointed out that the consolidation of commercial banks into larger ventures was positively related to the increased financial performance of commercial banks. Results of the ANOVA summary on Table 11 sought to examine the statistical significance of the moderating effect of joint ownership structure on the relationship between bank stability and the financial performance of the commercial banks. The F-statistic with the moderator variable was 29.476 which is greater than the f-critical value. The significance of the model was p=.000<.05. This shows that the coefficients in the model were not equal to zero and the model was fit. Findings of the study in Table 12, showed regression coefficients results for the moderating effect of joint venture ownership on the relationship between bank stability and financial performance. The coefficient of the interaction was .950 with a p-value of .000<.005. With the above significance in the coefficient of joint venture ownership bank stability, this implied that joint venture ownership significantly moderated the relationship between bank stability and financial performance of commercial banks.

Moderating Effect of Foreign Ownership on Bank Stability and Ownership Structure
Study runs a regression analysis to determine the moderating effect of foreign ownership structure on the relationship between bank stability and the financial performance of commercial banks. The equation for the interaction was; Y = βo+ β1 (Foreign Ownership * Bank Stability) + β2 (Foreign Ownership) + ε In line with the above results in Table 13, the regression model summary indicates that bank stability without the moderating variable explains 53.9% (R 2 = .539) variations in the financial performance of commercial banks. With the moderating variable factored in the effect improves to 73.3% (R 2 = .733). This implies that the foreign ownership structure has a positive effect on the relationship between bank stability and the financial performance of commercial banks in South Sudan. Abdallah, Amin, Sanusi, and Kusairi (2014) also indicated that foreign ownership of commercial banks had a positive effect on the financial performance of commercial banks in South Sudan. Results of the ANOVA summary sought to examine the statistical significance of the moderating effect of foreign ownership structure on the relationship between bank stability and the financial performance of the commercial banks. The F-statistic with the moderator variable was 54.192 which is greater than the f-critical value. The significance of the model was p=.000<.005. This shows that the coefficients in the model were not equal to zero and the model was fit. Findings of the study in Table 15, showed the regression coefficients results for the moderating effect of joint venture ownership on the relationship between bank stability and financial performance. Coefficient of the interaction was .784 with a p-value of .000<.005. With the above significance in the coefficient of foreign ownership bank stability, this implied that foreign ownership significantly moderated the relationship between bank stability and financial performance of commercial banks.

Conclusions
Findings of the study indicated that CAMEL components had a statistically positive effect on the financial performance of commercial banks. The study concludes that strengthening the CAMEL components can foster the soundness of commercial banks in South Sudan. The research further concludes that commercial banks should ensure there is regular examination of the CAMEL components to ensure the institution meets the optimal CAMEL model rating scores. The study found that a unit increase in foreign ownership would lead to increase in financial performance of commercial banks. The study concludes that from a regulatory standpoint the CBSS should come with new policy changes that are geared towards improving the financial status of public-owned and private local banking institutions to limit the growing dominance of foreign institutions and joint venture firms.

Recommendations
This study recommends that there is need for commercial banks to improve their performance in terms of their ROEs and ROAs. There has been a general erratic behaviour in the performance on these two specific ratios and it is clear that the overall performance has been sliding down; hence banks should undertake measures that will counter any negative impact on their overall financial performance. The study further recognizes that the nascent development of the banking institutions within the South Sudan sector has been noticed by the Bretton woods institutions. The study recommends that through bilateral engagements the Central Bank of South Sudan could engage the IMF and World Bank experts in designing better statutory policies as well as seeking extended cushion reserves injection that will help in expanding the growth and operation of indigenous banking institutions.
In respect to the ownership levels of commercial banks, the study notes that the South Sudan banking industry has come of age has witnessed by the increasing proliferation of foreign banking institutions within the sector. The study recommends that the regulator should develop a comprehensive policy that will guide the setting up of foreign banking institutions in the country. The study recommends that due to their advanced capabilities and growth foreign banking institutions should be compelled to shed part of their equity to local individual investor or institutional investor to develop a sense of ownership within the country. Further, the government should develop policies that will support local banking institutions to be able to comprehensively compete with larger foreign-owned banks.