The relationship between corporate governance practices and investment decisions by Commercial Banks in Kenya

Abstract

Good corporate governance practices are regarded as important in reducing risk for investors, attracting investment capital and improving the performance of companies. Commercial banks and other financial institutions hold their investments in several forms including local and foreign. As profit seekers, commercial banks are inclined to formulate policies that aim at diversifying their portfolio and thus guaranteeing some minimum rate of return. This study sought to investigate the relationship between corporate governance practices and investment decisions of commercial banks in Kenya. The study made use of a descriptive survey design. The population comprised of all commercial banks operating in Kenya as at December, 2011. This study used simple random sampling to select 30 commercial banks for the study. Two sources of data were used, primary data and secondary data. The data sought was on board dimensions such as board size, CEO duality and diversity which are the focus of corporate governance. Good corporate governance practices are regarded as important in reducing risk for investors, attracting investment capital and improving the performance of companies. Commercial banks and other financial institutions hold their investments in several forms including local and foreign. As profit seekers, commercial banks are inclined to formulate policies that aim at diversifying their portfolio and thus guaranteeing some minimum rate of return. This study sought to investigate the relationship between corporate governance practices and investment decisions of commercial banks in Kenya. The study made use of a descriptive survey design. The population comprised of all commercial banks operating in Kenya as at December, 2011. This study used simple random sampling to select 30 commercial banks for the study. Two sources of data were used, primary data and secondary data. The data sought was on board dimensions such as board size, CEO duality and diversity which are the focus of corporate governance.