Governance Practices and Financial Performance of Deposit Taking Saccos in Nairobi City County, Kenya

Abstract

Excellent governance practices are critical to corporate performance in the twenty-first century. Effective governance practices are the foundation for successful strategic management practices. Governance concerns have been highlighted as a fundamental fault in the majority of organizations. The research aimed to analyze the effect of corporate governance practices on the financial performance of savings and credit cooperative societies, a sector that has been plagued by financial losses and closures due to mismanagement and other governance issues. Research into deposit-accepting SACCOs in Nairobi, Kenya, led to this conclusion. The theories of agency, stakeholders, and dependency on resources informed this study. This study made use of a cross-sectional research design and focused on the top-level management of 34 DT SACCOS within Nairobi City County. The researchers used a convenience sampling. In which the researcher selected one (1) Sacco leader to represent their Sacco’s. Thus, the study involved 34 participants in the survey from 34 different Sacco’s. Researcher utilized questionnaires to collect data. Quantitative methods were used in the study; specifically, descriptive statistics calculated with SPSS version 26 were used to look at the data and show a relation between good governance and financial performance. The technique of regression and also correlation analysis were employed. The analyzed data was presented using distribution tables for facility of comprehension. The study found that the independence of the board (=.157, sig.=.206.05), the composition of the board (=.750, Sig=.0000.5), and the audit committee of the board (=.277, Sig=.0690.5) all significantly contributed to financial performance at the 95% confidence level. The research found a positive correlation between the financial performance of DT Sacco’s within Nairobi and the board's independence, composition, and audit committee. In light of the fact that not all of the independent advisory board's recommendations are followed, the report suggests that the management of Deposit Taking Sacco’s ensure the board's full participation in decision making. Sacco’s should think about expanding their boards so that they have access to more experts who can provide guidance on how to run the organization effectively. In conclusion, it is the responsibility of policymakers and the management of Deposit Taking Sacco’s to take the lead in ensuring that all board members that compose the audit committee are capable of withstanding and resisting the external influence of manipulating financial data for personal gain.