Corporate Governance Practices and Financial Performance of Registered Transport Savings and Credit Corporation in Nairobi County, Kenya

Abstract

Corporate governance is of great importance for financial performance. In Africa, Savings and Credit Cooperative Organizations (SACCOs) have been growing as a strong tool to meet financial needs. This is because, cooperatives are well placed to bring about equitable development and justice. However, SACCOs like any other business, are faced with challenges in their quest for growth and corporate governance stand as one of the main challenges facing SACCOs. Some of these SACCO shave come under spotlight for cases of mismanagement and a number of them have closed and therefore if this trend is not checked, it may lead to depletion of SACCOs’ funds and collapse of more SACCOs in Kenya. This study therefore, investigated the influence of corporate governance on financial performance of transport SACCOs in Nairobi County, Kenya. A legal notice by the ministry of cooperatives No. 23 of 2010 led to the formation of transport SACCOs where most of them were formed to comply with the rules but not for good management of their fleet. The objectives of the study were the effect of; chief executive officer duality, corporate social responsibility, disclosure and skill development on the financial performance of the transport SACCOs. The scope covered the transport SACCOs in Nairobi County which is the county with the largest number of transport SACCOs and thus a better overview for the study. The findings of this study will hopefully be beneficial to executive members of SACCOs and other cooperative societies in improving the performance of cooperative societies and enable them to compete locally and globally. The study was related to three theories; stakeholders’ theory, resource dependency theory and the agency theory. Empirical literature was sought by getting information from previous studies from various libraries and through internet search. This study applied a descriptive survey design where the population was 264 transport Sacco’s registered in Nairobi county, simple random sampling was applied and a sample size of 80 SACCOs was studied, primary data was collected using questionnaires while secondary data was gathered from the SACCO’s reports. Quantitative data was analyzed using a multiple regression model while qualitative data was analyzed by way of understanding the information given by respondents, these data was presented in tables, graphs, percentages and frequency distributions.As explained by R square, the Coefficient of Determination, 71.57% of the variation in the Financial Performance was explained by variability in the chief executive officer Duality, Corporate Social Responsibility, Disclosure of Information and Skills Development. Regression analysis results established that all the corporate governance variables assessed were useful predictors of financial performance. Correlation Analysis results established a very strong, positive association between corporate social responsibility and financial performance. The relationship between disclosure and financial performance was found to be strong and positive. The relationship between Chief executive officer Duality and financial performance was found to be negative and moderate in strength. The relationship between Skills Development and financial performance was found to be moderate and positive. As such, Corporate Governance played a central role to the financial performance condition of transport SACCOs. The study therefore recommended more investment in corporate governance practices as viable organisational strategies.