Influence Of Corporate Governance On Bank’s Perfomance In Kenya: A Case Study Of Kenya Commercial Bank, Kisumu Central District

Abstract

Corporate governance plays a very crucial role on firm’s performance. Lack of proper corporate governance systems can lead to corporate failures and declining firm performance. The study examined the influence of corporate governance on banks performance taking a case study of KCB, Kisumu Central District. The study sought to find out the influence of corporate governance on banks performance by determining the level at which internal control procedures influence banks performance, by establishing how social and environmental responsibility influence banks performance, by examining the extent to which corporate compliance influence banks performance and by assessing the influence of corporate culture on banks performance. The study was based on four assumptions that internal control procedures, social and environmental responsibility, corporate compliance and corporate culture influence banks performance. Important literature by other scholars on the same field on aspects pertaining to the influence of corporate governance and banks performance was looked at. The study was based on agency theory that stipulates that the separation of control of ownership facilitates the smooth running of the organization. Descriptive study design and purposive sampling was employed. Data was collected through primary resources by the use of self administered questionnaires. Data was analyzed quantitavely and qualitatively. Data presentation was done by the use of tables. The study achieved a response rate of 100%. Findings of the study revealed that majority of respondents 77 (77%) were male as compared to 23 (23%) of respondents who were female. Majority of respondents fell within the age brackets of 26-30 and 31-35 years at 28(27%) and 33(33%) respectively. The study reveals that majority of respondents were university graduates at 50(50%).Results from the study showed that 70 (70%) of employees in top management positions had worked in the Bank for more than ten years, Majority 90 (90%) of respondents who participated in the study acknowledged that Banks’ internal control procedures had a positive impact on customer base. This is justified by the fact that 32 (32%) of respondents said that Banks’ internal control procedures had highly increased the customer base. 68 (68%) of the respondents said that Banks’ internal controls procedures had fairly impacted on the customer base of the Bank. Out of 100 respondents who participated in the study, majority of respondents 90 (90%) acknowledged that social and environmental responsibilities carried out by Banks’ employees manifested into increase in customer satisfaction. Out of 100 respondents who participated in the study, 90 (90%) asserted that social and environmental responsibilities played by the Bank led to an increase in their customer base and by extension, increase in profit margins. A majority of respondents 60 (60%) consented that accountability of Banks’ employees on daily business transactions of the Bank positively satisfied customers of the Bank with varying degrees of effectiveness. On the contrary, 40 (40%) of respondents did not notice the manifestation of any impact on customer satisfaction as a result of accountability of Banks’ employees on daily business transactions of the Bank. Out of 100 respondents who participated in the study, majority 90(90%) acknowledged that organization culture and work ethics impacted on customer loyalty. Customer satisfaction, customer loyalty and a large customer base are all indicators of banks performance. Based on the study findings, recommendations are made: There are certain areas the study did not explore that were equally important but were left out because of the scope of the study. The study concludes by establishing a positive correlation between corporate governance practices and banks performance.