Relationship between corporate governance practices and financial performance of unit trusts in Kenya
Ingaiza, Hudson, K
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The study’s main objective was to establish and identify relationship between corporate governance practices and the financial performance of unit trusts in Kenya. A total of 18 registered unit trusts were studied. A descriptive research design was adopted for this study to enable a deeper search for factual information. A Likert scale questionnaire with a set of structured questions was served to the PR managers and company secretaries together with senior managers. A total of 36 questionnaires designed to contain both closed and open ended questions were issued out. But first the questionnaire was subjected to a pilot test on three different unit trust companies for appropriateness. The findings on testing the association between corporate governance practices and financial performance revealed a strong positive and significant association between the variables. The findings also revealed that of the corporate governance variables, the association between financial performance and shareholder right and responsibility had the strongest correlation. A positive linear relationship between the financial performance and corporate governance practices was also found to exist in the unit trusts in Kenya. It is recommended that the unit trust boards need to be efficient in all their responsibilities towards increased profitability of the company. The shareholders should exercise genuine and participative selection criteria in appointing the board members which determine the ability of the board to effectively manage the operations. Limitations and challenges encountered included time and financial constraints. The study was also limited to the unit trusts in Kenya only which limits the generalization of the findings to other sectors of the economy. It is recommended that further studies be carried out to determine on other sectors in Kenya considering the situation in the private sector organizations as well. A study should also be undertaken to evaluate the best practices in social responsibility played by the unit trusts and the significance of these practices to the society and economic development.
University of Nairobi