Effect of Corporate Governance on Intellectual Capital Disclosure Quality Among Commercial Banks in Kenya

Abstract

The banking industry is very important in the financial system as commercial banks' financial performance gives managers and policy makers great concern. However, over a third of banks worldwide are experiencing weak financial results. As a result, it is the responsibility of the corporate governance framework to ensure sufficient transparency relating to this value engine, as well as that the information disseminated by managers is accurate and trustworthy, which may be accomplished by maintaining a reliable control system internally as a vital part of a suitable corporate governance system. The study aimed to determine the effect of corporate governance on the intellectual capital disclosure quality among the commercial banks in Kenya. The specific objectives include: to investigate the effect of board independence, audit committee, board gender diversity, and board meetings on the intellectual capital disclosure quality among the commercial banks in Kenya. A descriptive research design was adopted. The study’s target population was 43 commercial banks operating in Kenya as at December 2020. The study included all the 43 commercial banks since all the elements of the population were included in the study because the population is small. The research employed secondary data obtained from Central Bank of Kenya annual reports and banks financial reports between 2015 and 2020. The data was cleaned, coded, and structured in such a way that it could be analyzed using the Statistical Package for Social Sciences (SPSS version 25.0). The study used descriptive statistics such as central tendency measures, frequency counts, kurtosis and skewness, and mean and standard deviation. The findings were presented on tables and graphs. The study found that board independence positively and significantly affected the intellectual capital disclosure quality among commercial banks in Kenya. The study also established that audit committee positively and significantly affected intellectual capital disclosure quality among commercial banks in Kenya. The study established that board gender diversity positively and significantly affected intellectual capital disclosure quality among commercial banks in Kenya. The study also established that board meetings positively and significantly affected intellectual capital disclosure quality among commercial banks in Kenya. The study concluded that corporate governance has significantly contributed to intellectual capital disclosure quality among commercial banks in Kenya. The study recommends that intellectual capital disclosure practices and requirements should apply across board no intellectual capital disclosure policies and requirements should be applied uniformly across the board, regardless of bank size, in order to disclose as much information to all interested stakeholders as possible. Corporate governance measures should be highlighted in all processes, and disclosure levels should not be limited to annual reports alone, as the data on annual reports may not provide all of the information that investors may need to assist in decision making.