Effect Of Corporate Governance On Financial Performance Of Savings And Credit Cooperative Societies In Kenya

Abstract

The enactment of the SACCO Act of 2008 established SASRA as an entity or state authority that regulates the Cooperative societies in Kenya, with the regulation covering deposit taking and to some extent non-deposit taking SACCOs. The enactment of SASRA regulation requires SACCOs to improve on corporate governance. This study was thus carried out with the aim of understanding the effects of corporate governance on the performance of SACCOs in post SASRA era. Specifically the study focused on analyzing the effect of board of director‟s tenure, board diversity and meeting frequency on the financial performance of SACCOs. The study used cross-sectional study design and had a target population of 49 that comprised of deposit talking SACCOs in Kenya. The researcher collected data from the respondents through secondary data and analyzed the same through SPSS. Data was analyzed using SPSS with regression analysis, ANOVA, and co-efficient of determination (R2 ) used to interpret the results. The study revealed that corporate governance practices affect the financial performance of SACCOs. This was by 28.4% and 28.6% without control and with control variable respectively. Specifically without control variables the results showed (0.061), 0.002, 0.017, 0.026, (0.004) and 0.018, indicate the effect of professional expertise, gender diversity, average tenure of directors, frequency of meetings and age of board members. On the inclusion of control variable the results indicated that gender and director tenure was significant while the rest of the variables were not significant. The study concludes that social heterogeneity and director tenure affect financial performance of SACCOs. Thus the study recommends the need effective implementation of gender diversity and director on tenure regulations.