The Effect of Corporate Governance on the Financial Performance of Financial Institutions Listed at the Nairobi Securities Exchange

Abstract

Corporate Governance has taken centre stage in many organisations due to the important role it plays in these organisations and in the economic status of the nation. The intent of this study was to determine the effect it has on the fiscal output of listed financial institutions. The major elements that were focused are composition of the board, its size as well as CEO duality. A descriptive design was used with the sole purpose of reaching the objectives of this study .An analysis of the 11 banks and 6 insurance companies listed on the NSE was done, using five years financial information between 2012 and 2016 obtained from the financial statements of these institutions. The association between the different variables and the fiscal accomplishment of these institutions was determined using Linear Regression Model and the revelation was that there existed no outstanding correspondence between the various corporate governance variables and the firm’s achievement financially as measured by ROA and ROE. This study unearthed that there existed no connection among the measures of Corporate Governance including CEO duality, Board Size, Age of Company and Board Composition and the financial performance of NSE-listed financial institutions. The study advocates that the firms adhere to regulations such as gender balancing, proportion of independent directors to dependent directors and splitting of role of CEO and Chair for efficient and effective running of the business.