The Relationship Between Bank Corporate Governance and Performance of Kenyan Banks

Abstract

The agency theory proposes a large board size and a board dominated by non-executive directors. Studies have been done on data of companies in different sectors both in Kenya and outside. This study examined the relationship between corporate governance and performance of Kenyan banks. The study was motivated by the recent cases of banks collapse in Kenya for instance, Chase bank, Imperial bank and Dubai bank. The study employed panel data for the period 2008-2015, generalized method of moment (GMM) estimation technique was used in order to overcome the endogeneity problem. The empirical findings indicate that corporate governance variables, board size, and non-executive directors do not influence performance of Kenyan banks. The results of this study went ahead to establish that Kenyan banks corporate governance practices are not at par with each other. Market risk and business risk factors do not influence adoption of corporate governance practices in Kenyan banks.