| dc.description.abstract | Recent empirical work in developed markets shows evidence for higher valuation
of firms in countries with a better legal environment. The study investigates whether the
CMA corporate governance code has any impact on the financial performance of
commercial banks in Kenya.
The Kenyan CMA guidelines resemble the guidelines set out by the Organization
for Economic Cooperation and Development (OECD) code as they stipulate the main
board duties as those of monitoring and disclosure. These guidelines appear to indicate
that the role of expertise is that of monitoring rather than value addition for the purposes
of increased operational efficiency; hence in the board independence versus board
competence debate the CMA guidelines are very similar to the OECD and Cadbury
Report guidelines in that they emphasis board independence as a means to resolving of
principal-agency conflicts.
In constructing a broad Kenyan corporate governance index (CGI) for Kenyan
commercial banks, this study lays emphasis on board competence; it documents a
positive relationship between CMA guidelines and Return on Assets and negative
relationship between CMA guidelines and Return on Equity. For both listed and nonlisted
banks the relationship between the corporate governance index (CGI) and the
TRWA, as well as between CGI and both ROA and ROE, is significant and positive;
indicating that adherence to CMA corporate governance guidelines has not led to neither
improved bank solvency nor improved returns for both the listed and non-listed bank
samples of 28. | en |
