dc.description.abstract | The basic role of corporate governance entails regulating the activities of the board. It also
controls and oversights the actions of executives to enhance shareholder wealth. However,
the weak corporate governance system has led to the collapse of the organizations that have
survived to this day. Further, recently, there has been concerns on governance and firm’s
performance interrelationship, largely because of increase in corporate scandals which
results to a declining shareholder value, bank failures and dimmed investor confidence. In
Kenya, the banking industry undertakes an important role in growth and the sector delivers
higher savings levels with funding investment requirements. However, the performance of
the sector has been dropping even since collapsed the collapse of three banks in less than
12 months in the 2015/2016 financial year. Regardless of the efforts put in place to
streamline the financial sector, some banks are still under statutory management while
others have been liquidated. This study sought to determine the effect of corporate
governance on financial performance of commercial banks in Kenya. This research
reviewed key theories to explain CG as, the agency theory, the stakeholder, stewardship
and the shareholder theories. This study employed a descriptive research design and the
population of the research consisted 39 commercial banks in Kenya as at 31st December
2021. This study used secondary data source and was sourced from the audited financials
and yearly reports of the various Kenyan banking entities for five years from 2017 to 2021.
Descriptive and inferential statistical tools were used for data analysis using the SPSS
statistical software. Correlation and regression analysis were used to determine whether a
relationship exists between independent and the dependent variable. The study finding
revealed a positive and significant relationship between board size and financial
performance. The findings indicated that board independence had a positive but
insignificant relationship with financial performance while audit committee size had a
negative and insignificant effect on financial performance. The study further established
that bank size had a positive and significant effect on financial performance while liquidity
had a positive but insignificant effect on bank performance. Finally, capital adequacy had
a positive and significant effect on financial performance. The study concluded that board
size, bank size and capital adequacy significantly affects Kenyan banking institutions
financial performance. The study also concluded that board independence, audit committee
size and bank liquidity had an insignificant effect on Kenyan banking institutions financial
performance. | en_US |