Corporate governance practice and its effect on financial performance in SACCOs (A case study of urban SACCOs in Kirinyaga County- Kenya)
Kamonjo, K. Lawrence
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Corporate governance practice and its effect on financial performance in SACCOs (A case study of urban SACCOs in Kirinyaga County- Kenya) The study sought to examine the effects of corporate governance practices on financial performance of SACCOs, and it was conducted in Kirinyaga County in Kenya. The independent variables that were used are: board size, internal audit function and frequency of board meetings. Return on Capital Employed was used as a measure of financial performance. Financial information for the period between year 2006 and 2009 was used. Data was collected using a questionnaire. The study employed descriptive survey design. The population for the study was drawn from thirteen active urban SACCOs in Kirinyaga County. Complete census of the population was used since the number of urban SACCOs is not very big; hence it was possible to reach all of them within a reasonable time. Data was analyzed using regression analysis tec1mique. The findings of this study indicate that there is a negative relationship between the size of the board and the financial performance; the average board size being seven. The study also revealed a positive relationship between the frequency of board meetings per year and ROCE; the average number of meetings per year being ten. Regarding the presence of internal audit function, the study revealed a negative relationship between ROCE and the presence of the internal audit function, with only 23.PYO of the respondents indicating that they have audit departments in their SACCOs. The study recommends regular board meetings, which should focus on initiating strategic actions for the SACCOs. The study also recommends enhancement of independence and effectiveness of internal audit function in SACCOs. It further recommends a board size that suits the needs of each SACCO, and which provides desired mix of skills, effective communication cohesiveness of the board.