Corporate governance best practices and performance by deposit taking savings and credit co-operative societies in Nairobi city county

Abstract

Proponents of corporate governance say there is a direct correlation between good corporate governance practices and long-term shareholder value. This study examined the relationship between corporate governance best practices and the financial performance of deposit taking SACCOs in Nairobi County. It investigated the composition of boards of directors within these organizations and analyzed whether corporate governance best practices have an impact on financial performance, as measured by return on assets (ROA). The study used primary data from a developed questionnaire and secondary source data collected from the SACCOs financial reports filed with SASRA. It specifically looked at four board characteristics (board independence, board size, gender of the board of directors and number of board committees) which were set as the independent variables. The Ordinary Least Squares (OLS) regression was used to estimate the relationship between corporate performance measures and the independent variables. Findings from the study show that there is strong positive association between board size and corporate financial performance. Evidence also exists that there is a positive association between board independence and financial performance. Good positive association was also observed between number of the board committee and gender of the board members, and firm financial performance. In conclusion therefore The study suggests that large board size should be encouraged and the composition of outside directors as members of the board should be sustained and improved upon to enhance corporate financial performance