Relationship Of Corporate Governance Practices On Financial Performance Of Commercial Banks In Kenya

Abstract

The study sought to establish whether there is a relationship between corporate governance practices and the financial performance of commercial banks in Kenya. The practices of corporate governance that the study focused on include board independence, board size and disclosure and board meetings. The study was anchored on agency theory, stakeholder theory and stewardship theory. The researcher used descriptive survey research design. In Descriptive Research, quantity data was collected and analyzed so that a specific phenomenon is described in its current trends, current events and it is linked with different factors at the current time. They study population in this case was all 43 Commercial banks in Kenya while the sample size was 28 banks. The study used secondary data obtained from banks’ published reports, bank journals and periodicals. Secondary data was more useful for finding out the financial performance of the banks. Statistical tool for analysis (SPSS) and regression model was used to analyze data. The study used a multivariate regression model to establish the effect of corporate governance practices on financial performance of commercial banks in Kenya. The correlation results implied that corporate governance practices significantly affected the performance of commercial banks in Kenya. From the multivariate regression analysis the study established that corporate governance practices significantly affected performance of the commercial banks in Kenya. Board independence was found to enhance performance while board size and board meetings negatively affected the performance.