The Effect of Corporate Governance on Financial Performance of Large Tier Savings and Credit Cooperative Societies in Kenya

Abstract

Corporate governance entails accountability, transparency and credibility, as well as being able to put in place effective channels that can disclosure information in a manner that will foster good corporate performance. Corporate governance takes place within the firm and mostly depends on the firm’s shareholders, the board of management and the company executives its successful realization. This study sought to answer the question of what is the effect of corporate governance on financial performance of SACCOs in Kenya. This research employed a descriptive research design and the 15-large tier deposit taking Sacco’s in Kenya made up the study population. The study used secondary data which covered a period of five years from 2012 to 2016. To determine the relationship between the variables the multiple linear regression model was used. The study found that board size, CEO duality and firm size had a negative and significant relationship with financial performance of SACCOs in Kenya. However, the findings revealed that board structure had an insignificant positive relationship with financial performance of SACCOs in Kenya while board diversity and audit committee size had an insignificant negative relationship with financial performance of SACCOs in Kenya. The research concluded that financial performance is influence by the board size, CEO duality, size while board composition and diversity and audit committee size do not have a significant effect on financial performance of Sacco’s in Kenya.