Effect of Corporate Governance on Efficiency of Deposit Taking Savings and Credit Cooperative Societies in Nairobi County, Kenya

Abstract

Numerous studies have supported that corporate governance is likely to improve business performance. Some scholars have argued that firms that handle corporate governance issues well exhibit cost advantages over those that do not. A lack of corporate governance structure denies the companies robust and harmonized decisions and is reflected in their performance. The study’s intent was to determine how corporate governance impacts efficiency of DT SACCOs in Nairobi County, Kenya. All the 43 DT-SACCOs in Nairobi County, Kenya were selected for the study. The independent variable for the study was corporate governance with four measures; board independence, diversity, meetings and board size. The control variables were liquidity and firm size. Firm efficiency was the response variable the study intended to explain. Secondary data for five was collected (January 2015 to December 2019) for every year. A descriptive cross-sectional design together with a regression model was chosen in analyzing the relation that the variables had. Data analysis made using SPSS version 23. Findings produced an R-square value of 0.317 that concluded that approximately 31.7 percent of the variation in the efficiency of DT-SACCOs in Nairobi County, Kenya was explained by the six variables while 68.3% changes in efficiency of DT-SACCOs was explained by factors beyond the scope of the study. The study also found that the independent variables were strongly correlated to efficiency (R=0.563). ANOVA analysis showed the F statistic to be significant at 5% with a p=0.000. The model was thus appropriate to explain the relation between the chosen variables. It was further showed that board independence, board diversity, board size, liquidity and firm size had positive substantial values for the study while board meetings was found to be a statistically insignificant determiner of efficiency. The recommendation highlighted by the study was the institution of measures enhancing board diversity, board independence and size as these three have a substantial impact on efficiency of DT-SACCOs in Nairobi, Kenya.