The Relationship Between Corporate Governance And Financial Performance Of Stock Brokerage Firms And Investment Banks In Kenya
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Date
2012Author
Maalu, Mary Ndinda
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Corporate governance is an area that has grown rapidly in the recent years due to the
global corporate scandals and collapse of big companies. The purpose of this paper is to
empirically investigate the impact of corporate governance aspects (board size, board
composition, separation of role of chairman and Chief Executive Officer, ownership
structure (insider ownership), information disclosure and frequency of board meetings on
financial performance of firms. The objective of the study is to determine the relationship
between corporate governance and financial performance of stock brokerage firms and
investment banks in Kenya. Return of Assets (ROA) was used as a measure of financial
performance.
The study used a causal design where primary data was collected from all the 19 stock
brokerage firms and investment banks (members of Nairobi Securities Exchange) in
Kenya using a questionnaire. The data was analyzed using statistical tools.
The study found out that there exists a relationship between different aspects of corporate
governance and firm’s financial performance. Board size had significant positive
relationship on financial performance. Firms with bigger boards reported better results
than those with smaller boards. Board composition had significant but negative
relationship with financial performance. Firms with a higher proportion of non-executive
directors performed worse than those with a smaller proportion. The study revealed no
significant relationship between ownership structure (insider ownership), information
disclosure and frequency of meetings with financial performance of firms.
Publisher
University of Nairobi