Effects Of Corporate Governance Practices On The Performance Of Insurance Companies In Kenya

Abstract

Corporate governance encompasses how authority, accountability, stewardship, leadership, direction and control are exercised in corporations in the quest of achieving its corporate objectives. The specific objective of the study was to determine the effect of equitable shareholder treatment, transparency, accountability and board's release of responsibility on the financial performance of Kenyan insurance companies. This study used a descriptive research design which entails survey and fact finding inquiry. It has considerable ability to generate answers to questions like what, who, where and how. The study focused on the top level governance, middle level governance and the lower level governance of Kenyan insurance companies. The research used survey census. The study collected both primary and secondary data for the purpose of analyzing the relationship between corporate governance practices and the financial performance of Kenyan insurance companies. Data collected was analyzed using both quantitative and qualitative methods with the help of (SPSS) version 21 and excel spreadsheets. The regression findings found that equitable shareholder treatment, transparency, accountability and board's release of responsibility were statistically significant on financial performance of Kenyan insurance companies. The overall multiple linear regression models was tested using ANOVA and the resulting F-stat indicated that the model was significant at 95% significance level. The study drew conclusion that equitable shareholder treatment had an affected on the financial performance of Kenyan insurance companies. Since according to the findings rights of minority shareholders is well articulated in governance policies; that the company procedures for re-election and appointment of the board are clear formal and transparent. On the effect of transparency and the financial performance of Kenyan insurance companies the study recommends that in order to achieve transparency, Kenyan insurance companies should safeguard accurate accounting methods, policy and practice, make full and prompt disclosure of company information and make disclosure of conflict of interests of the directors or controlling shareholders. A key element of ‘good’ governance is transparency, which incorporates a system of checks and balances among the board of directors, management, auditors and other stakeholders.