The Effect of Corporate Governance on the Financial Performance of Deposit Taking SASRA Regulated SACCOS in Kenya

Abstract

SACCOs management has been associated with poor corporate governance enshrined with high levels of fraud and lack of effective rules. In addition, few studies have been conducted on SACCOs on corporate governance effects on financial success or distress. This study aimed at evaluating the effect of corporate governance on financial performance of SASRA regulated deposit taking SACCOs in Kenya. The study considered three theories, i.e., Resource dependency theory, stakeholder theory and agency theory. 39 tier one SASRA regulated deposit-taking were sampled for the period December 2018 to December 2022. Secondary data from various source was relied on. Descriptive statistics in tables showing minimum, maximum, median, mean, and standard deviation and multiple linear regression were applied for analysis of data. A significance level of 5 % was applied for all analysis. The study found a positive insignificant relationship between return on assets and the number of directors, supervisory committee size and the size of the SACCO. There however exist a negative but significant relationship with the ratio of female to male directors. The regression coefficients also implied a negative and insignificant relationship between return on assets and the number of independent directors. The study recommends that though the significance of board size, supervisory committee is low, adequate numbers should be maintained in line with SASRA guidelines to oversee governance. The study recommends maintaining a right mix of female directors as well as non-independent directors in the board which currently is low. SACCO size levels should be maintained at where negative effect is minimal. The study recommends further research on governance for non-regulated SACCOs, on other governance characteristics and on non-withdrawable deposit SACCOs