The Relationship Between Transparency, Disclosure and Financial Performance of Insurance Companies in Kenya
Abstract
ABSTRACT
There has been increased public and academic discussion of issues related to corporate
governance in most countries with active capital markets. Corporate boards worldwide
have been attracting a great deal of attention in the past decade because of corporate
failures and concerns about the performance of corporations and the way they are
governed. Both firms and regulators are considering how best to ensure good corporate
governance. The purpose of this research was to find out the relationship between
corporate transparency, disclosure and company performance. The empirical research is
based on insurance companies in Kenya.
The corporate transparency database for this study is created on a yearly basis for the
period of 2008 to 2012. In accordance with the attributes defined by Standard & Poor’s in
the Corporate Governance Forum, transparency and disclosure attributes, which are 105
in total for each company, are extracted from annual reports of the publicly held firms,
afterwards converted into percentages in three different subcategories, which are
ownership structure & investor relations information disclosure financial information
transparency & board management structure information disclosure. This study
summarized the attributes to 30 which are not stipulated in the corporate governance
guidelines. Transparency attributes consist of 5 years (2008-2012) and 40 companies.
The study found that return on assets and financial information disclosure and ownership
and investor relationship were positively correlated and that the model used was
significant since the significant values were less than 0.0l at 95% confidence levels. In
light of this research, the researcher concluded that transparency and disclosure has
positive effects on the financial performance of insurance companies and this can be
explained because improving the level of disclosure reduces information asymmetry and
cost of capital therefore regulators should promote the level of transparency and
disclosure .
Publisher
University of Nairobi