Corporate Governance and Performance of Financial Institutions in Kenya
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Date
2020
Authors
Chelangat, Flevy
Sang, Paul Kipyegon
Journal Title
Journal ISSN
Volume Title
Publisher
International Journal Corner
Abstract
The introduction of corporate governance code by the central bank of Kenya in early 2000, corporate governance has
attracted an incomparable attention of researchers because of expanding financial troubles financial firms are
experiencing everywhere in the globe. Recent scandals regarding the moral deficiency of some financial institutions have
stimulated public sensitivity towards cooperative governance issues of these firms. This study’s main objective is based on
empirical analysis which seeks to establish the effects of corporate governance on firm’s performance within the Kenyan
financial sector, including the characteristics of the management body, i.e. Board size, ownership concentration,
auditor’s reputation, independent directors, CEO’s duality and annual number of board meetings, firm’s size and leverage
i.e. financial risk management. The researcher did a rigorous desktop review of secondary information on ‘cooperate
governance’ and ‘performance’ from 2014 to date in the online library of various documents, publications and reports
including journals and magazines. Based on the previous studies reviewed, the researcher appreciated that corporate
governance is the key to the global integrity especially for financial institutions whose existence is wholly dependent on
trust and integrity. Different scholars have advocated for different measurers to corporate governance on the measure of
firms’ performance and the common identified are board size, ownership concentration and auditor’s reputation have a
positive and significant impact on firms’ return on assets (ROA), whereas the percentage of independent directors and
the annual number of board meetings have negative and significant impact on firms’ return on equity (ROE). CEO duality
is found to not be an important determinant factor of firms’ performance, as the results suggest that it shows
insignificant effect on ROA and ROE. Firm’s size and leverage are found to have negative and insignificant relationship
with firms’ performance. The study, recommended among others that Financial Institutions should increase their board
size but within the maximum limit set by the code of corporate governance and ensure that all regulations provided by
Central Bank are fully complied with.
Description
A research articl epublished in The International Journal of Business & Management
Keywords
Corporate governance, firm performance, audit committee, CEO duality, board size, board composition, firm size, return on asset, return on equity
Citation
The International Journal of Business & Management. Vol 8 Iss 12