The effect of board composition on operational efficiency of deposit taking Saccos in Kiambu county, Kenya
Abstract
In the modern day business environment, the role of the board of director’s composition has emerged as strategic resource that is crucial to enhancing operational efficiency through application of corporate governance principles. SACCOs are among the fastest growing sub sectors in Kenya’s Cooperative Movement. The Vision 2030 strategic plan calls for reforms in the financial sector to ensure the implementation of corporate governance principles for purposes of enhancing transparency and efficacy in the management of depositor’s funds. Most SACCOs have since implemented such strategies but an evaluation of how board composition affects its efficiency has not been undertaken hence the knowledge gap that this study sought to fill. The objective of this study was to determine the effect of the board of director’s composition on efficiency of deposit taking SACCOs in Kiambu County. The study used three most widely used theories agency, stewardship and stakeholder theories. The research adopted an analytical research design using trend analysis and correlation analysis. This research targeted 15 deposit taking SACCOs operating in Kiambu County. Due to the small nature of the target population the study was a census survey. The main information gathering instruments was a questionnaire to collect data on board characteristic and secondary data collection on financial performance indicators of revenue and expenditure for the period between years 2002 to year 2016 for all the 15 SACCOs. Information concerning the board characteristics for the years 2002 to 2016 in each of the SACCOs was collected coded and tabulated for purposes of further analysis. Data was coded and analysed using trend analysis correlation analysis and regression analysis. The findings indicate that operational efficiency is positively correlated to risk and therefore we conclude that improvement in aspects of board composition enhances operational efficiency of deposit taking SACCOs in Kiambu County. The study recommends that the composition of board of directors for effectiveness should be characterized by increase in gender balance of the board members, improvement education qualification, and increase in individual board member years of professional experience, increase in director’s independence, increase/adequate compensation package to the board and reduction in share ownership of the board. Administration costs in regard to the composition of the board do exist but shareholders should bear the liability associated with such since it results in improved efficiency
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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