Corporate Governance and Financial Performance of Kenya Commercial Bank Limited in Kenya
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Date
2024-10
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Kenyatta University
Abstract
Since the last financial distresses that occurred in the world over the influence of company, there have been increased interests on the study of the impacts of governance practices on the financial performance of banking institutions. Consequently, this study focuses on determining the role of Corporate Governance and financial performance of KCB Bank Kenya limited. The results of previous researches that were conducted between company governance and financial performance are mixed and inconclusive. The lack of internal controls, weak company governance practices, weaknesses in restrictive and superior systems, business executive loaning and conflict of interest are factors behind the history of poor governance system within the banking system which have resulted to the problems of the many financial institutions with others sinking into receivership. Despite the measures put in place by establishments like CBK, Capital Markets Authority and Centre for corporate Governance campaigning permanently on governance, the matter of corporate governance is nonetheless yet to be solved. The study therefore sought to establish the effect of corporate governance on financial performance of KCB Bank Kenya limited. The study was guided by the following objectives: to establish the effect of board composition, board size, board independence and internal controls on financial performance of KCB Bank Kenya limited. The study was grounded on agency and stakeholder theory. On the other hand, the study utilized descriptive research design. The study target population consisted of 241 management staff of KCB Bank Kenya based at its headquarters in the capital city of Nairobi. Stratified random sampling was utilized for its primary and secondary data. The study’s primary data was gathered by the use of questionnaires involving the research assistants to administer them. The study’s secondary data was gathered by the use secondary data collection sheet from the firm’s annual financial statement. The gathered data was then analysed by the use of inferential and descriptive statistics using SPSS software. The findings were presented through percentages, standard deviation, means and tables. The study established that corporate governance was significant and to a great extent affected the financial performance of KCB Bank Kenya limited. The study concluded that the bank board had in place a board structure with fair and balanced constitution, experienced, skilled and knowledgeable board members who propelled the firm to profitability. It was further concluded that the firm has a independent board that makes decisions in a free and fair way without undue influence and embraces integrity. The study concluded that the firm had significantly sound internal control mechanisms with the board taking charge in expenditure oversight, advocating for strong internal audit, accounting system, accountability and integrity and approving expenditure coupled with holding the CEO accountable to the board. The study recommends that KCB Bank Kenya Limited needs to embrace a leaner and effective board size that is swift in decision making, efficient and coordinative. The study recommends that the company board needs to embrace independency, accountability, transparency and integrity to ensure firm’s resources are diligently utilized. The company board needs to have a flexible structure that constitutes experienced, skilled and diverse members who can bring in new ideas to propel the firm to peak performance. The firm also needs to enhance board oversight on the company expenditure, management and resource monitoring to promote accountability and efficiency.
Description
A Research Project Submitted to the School Of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of Masters of Business Administration Degree (Finance), Kenyatta University, October 2024
Supervisor:
1.Peter Ng’ang’a