Corporate Governance And Financial Performance Of Commercial Banks In Kenya

Abstract

The impact of corporate governance on the financial performance of Kenya's commercial banks was investigated in this study. “The study examined the impact of board size, audit structure, ownership structure, and firm size on the financial performance of Kenya’s commercial banks. This study used a descriptive design and included all 39 of Kenya's commercial banks. The study relied on data from yearly financial reports from 2015 to 2021. The study adopted a descriptive research design and secondary data was used. The time scope of the study was 2016-2021. The study adopted the use of secondary data where panel data was used. The study conducted Multicollinearity, Heteroscedasticity, Normality test, Autocorrelation Test and Durbin– Wu – Hausman Test. The data was analyzed using descriptive and inferential statistics. The results showed a positive and significant relationship between board size and financial performance of commercial banks in Kenya. There was a positive and significant relationship between ownership structure and financial performance of commercial banks in Kenya. Audit committee structure had a positive but insignificant relationship with financial performance of commercial banks in Kenya. Lastly, the results further portrayed a positive and significant relationship between board size moderated with firm size and financial performance of commercial banks in Kenya. The study concluded that board size, ownership structure and audit committee structure and firm size had a significant effect on financial performance of commercial banks in Kenya. The study recommends that banks should ensure transparency and disclosure in all the activities undertaken during the period of operation to assist investor in decision making. The study also recommends that audit committees should enhance practices that will help them conduct effective meetings. Each committee should consider what is most effective for its circumstances, but certain practices are valuable. Critical discussion and engagement in meetings should be encouraged by the chairperson and members should come prepared, having read all advance materials and prepared questions for management.”